Tds basic amount for tds u/s 195
This query is : Resolved
05 April 2019
We have to make payment to a Foreign Vendor who has provided Technical Consultancy Services. In this case we have to pay GST under RCM. In this regard I request that kindly advise whether TDS u/s 195 is be deducted on the amount Including the GST RCM or without GST RCM.
Urgent Please.
regards,
A K Sarma
Urgent Please.
regards,
A K Sarma
05 April 2019
The service provider’s income is subjected to income tax for services rendered in India. Such tax is discharged by the recipient as per provisions of the Income Tax Act by way of TDS i.e. TDS is just a method to discharge tax liability of supplier by the recipient.
TDS is actually payable by the recipient as per the contract. The liability of tax is discharged by the recipient on supplier’s behalf and such a tax is also booked as an expense in the books of accounts of the recipient hence, it is an expense which is incurred by the importer and the same was not included in the price actually paid or payable for the goods or services or both.
TDS is payable in respect of supplies of services procured and hence it is a consideration as defined in section 2 (15) of the CGST Act. The same view is supported in [2009] 18 STT 312 (NEW DELHI – CESTAT) Commissioner of Central Excise, Jaipur-I vs. Louis Berger International Inc.
Further, in terms of section 9(3) of the CGST Act all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both covered by that section. Thus, by such legal fiction the consideration inclusive of income-tax deducted at source shall be assessable value for the purpose of the Act in the hands of the recipient. Since the terms spoke that the price of contract payable was net of taxes and taxes, if any payable, in addition to the price of contract was payable by the payer thereon as price of the contract; hence, in view of such factual aspect, the tax payable in India was to form part of contract price. Thus, consideration charged for the service provided shall include income-tax deducted at source as per terms of contract and is in accord with section 9 (3) of the CGST Act for the reason that net price of contract agreed to be paid to foreign consultant was to include income deducted at source thereon to be price also.
In light of the above underlined provisions in the GST regime, the withholding tax will be liable to be subjected to GST. The same view was supported by TVS Motor Company Limited[2012] 25 taxmann.com 475 (Chennai – CESTAT)
Also it would be pertinent to make a note that GST paid on reverse charge basis on TDS part is eligible for availment of credit subject to provisions related to availament of credit in the GST Laws thereby leading to no loss.
TDS is actually payable by the recipient as per the contract. The liability of tax is discharged by the recipient on supplier’s behalf and such a tax is also booked as an expense in the books of accounts of the recipient hence, it is an expense which is incurred by the importer and the same was not included in the price actually paid or payable for the goods or services or both.
TDS is payable in respect of supplies of services procured and hence it is a consideration as defined in section 2 (15) of the CGST Act. The same view is supported in [2009] 18 STT 312 (NEW DELHI – CESTAT) Commissioner of Central Excise, Jaipur-I vs. Louis Berger International Inc.
Further, in terms of section 9(3) of the CGST Act all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both covered by that section. Thus, by such legal fiction the consideration inclusive of income-tax deducted at source shall be assessable value for the purpose of the Act in the hands of the recipient. Since the terms spoke that the price of contract payable was net of taxes and taxes, if any payable, in addition to the price of contract was payable by the payer thereon as price of the contract; hence, in view of such factual aspect, the tax payable in India was to form part of contract price. Thus, consideration charged for the service provided shall include income-tax deducted at source as per terms of contract and is in accord with section 9 (3) of the CGST Act for the reason that net price of contract agreed to be paid to foreign consultant was to include income deducted at source thereon to be price also.
In light of the above underlined provisions in the GST regime, the withholding tax will be liable to be subjected to GST. The same view was supported by TVS Motor Company Limited[2012] 25 taxmann.com 475 (Chennai – CESTAT)
Also it would be pertinent to make a note that GST paid on reverse charge basis on TDS part is eligible for availment of credit subject to provisions related to availament of credit in the GST Laws thereby leading to no loss.
05 April 2019
Sir,
Please advise whether Gross amount for deducting TDS u/s 195(payments to non-residents) is with or without GST amount of RCM ex. Value of Services Provided Rs.100/- GST under RCM is Rs.18/-. for TDS u/s 195, whether the gross is Rs.100 or Rs.118/- pl. advise.
regars,
A K Sarma
Please advise whether Gross amount for deducting TDS u/s 195(payments to non-residents) is with or without GST amount of RCM ex. Value of Services Provided Rs.100/- GST under RCM is Rs.18/-. for TDS u/s 195, whether the gross is Rs.100 or Rs.118/- pl. advise.
regars,
A K Sarma
05 April 2019
If you are grossing up (i.e. paying TDS on your own) you need to pay GST on that too means TDS of Rs 118.
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