CA. Vipin Gupta (Accounts Officer) (146 Points)
05 January 2010we are paying technical fees to italian consultant who is non resident and rendering services in india. we are paying Rs. 2 Crore as Technical fees and we have to bear TDS as well as Service Tax.
my query is that either we have to first calculate TDS and then service tax on total amount or vice versa.
Amir
(Learner)
(4016 Points)
Replied 05 January 2010
Dear Vipin ,
Lets Assume that TDS rate is 20% and Service tax rate is 10% (FOR SIMPLICITY I M IGNORING EDUCATION CESS, ETC)
Now First we have to Gross it up by applying TDS Rate since TDS is to be borne by Indian Co.,
i:e 2 crores / 80*100 = 2.50 crores
So, Indian Co has to deposit 0.50 crores as TDS
Further Indian Co. Has to Deposit Service Tax as well @ 10%
Therefore, 10% on 2.50 Crores = 0.25 Crores will be deposited as Service Tax
CA. Vipin Gupta
(Accounts Officer)
(146 Points)
Replied 05 January 2010
thanks Amir for your time
But you are applying service tax on TDS amount also. in my View service tax also should be on 2 Crore only
Amir
(Learner)
(4016 Points)
Replied 05 January 2010
Dear Vipin,
If u look at the other side that "gross(payment + tds) amount of service which u have availed or the gross(payment+tds) amount which u will be debiting to your profit/lpss a/c"
According to me Service tax will be deposited on the amount of tds also..(because by depositing tds u r simply discharging the obligation of the service provider and tds amount will constitute as additional consideration in this case and hence liable to service tax)
FATEMA
(CHARTERED ACCOUNTANT)
(719 Points)
Replied 05 January 2010
Agree with Vipin.Service tax will be on Rs. 2cr and then TDS will be deducted on the bill amount + service tax
CA. AMIT BHUTANI
(JOB)
(124 Points)
Replied 05 January 2010
| Originally posted by : FATEMA | ||
 |
Agree with Vipin.Service tax will be on Rs. 2cr and then TDS will be deducted on the bill amount + service tax |  |
MR. AMIR IS RIGHT IN HIS VIEW.
R!tu Ber!
(Chartered Accountant)
(405 Points)
Replied 05 January 2010
TDS should be deducted on BILL AMOUNT+S.T. , thsi is general practice and consired as unobjected whereas TDS to be there only for bill amount is many a times topic of discussion an objectionable too so for the safer side first opyion is adopted and practice is to apply service tax on baill than TDS is deducted on the BILL+S.T.
R!tu Ber!
(Chartered Accountant)
(405 Points)
Replied 05 January 2010
so in my opinion the bil should be
Technical Fees 20000000
St 2000000
total 22000000
TDS @ 20% 4400000
this is as per the assumptions of Mr. AMIR
Please correct me if m wrong in getting the question or giving the solution
This solution is as per our practice what i saw in our training period.
Amir
(Learner)
(4016 Points)
Replied 05 January 2010
Dear Ritu,
The general practice of TDS on Amount including Service tax is followed in casse of Resident;s since they usually recover Service tAx on the invoive & TDS Provision says that it has to be deducted on Gross (including service tax) Amount credit/paid..But in Case of Non Residents/Import of Services there is no one to recover Service tax and hence tds has to deducted on the payment made (exclusive of service tax)..
shailendra
(C.A. FINAL)
(189 Points)
Replied 05 January 2010
In my view, Service tax will be calculated on Rs. 2 crore only, because amount of TDS deposited to govt. will not form part of additional consideration to the non resident.
Additional consideration is something waht one person have incurred on behalf of another and some benefit indirectly flows to the another person. Our Income Tax Act and Finance Act 1994 has never imposed the liability of depositing TDS and service Tax to indian govt. on the non resident.
Since it was only the liability of resident assessee to deposit the TDS and service Tax to indian govt. so no benefit flows to the non resident by depositing TDS on the fees paid to him.
Since no benefit flows to the non resident, so no additional consideration is there.
I agree with Amir sir in the view that an amount of Rs. (2cr.+TDS) will be debited to P/L a/c but still service tax will be calculated on Rs. 2cr.
Amir
(Learner)
(4016 Points)
Replied 05 January 2010
DEAR SAILENDER,
HAD SERVICE PROVIDER NOT INSISTED ON THE CLAUSE THAT "TDS TO BE BORNE BY INDIAN CO" THEN THE INDIAN COMPANY WOULD HAVE MADE THE PAYMENT BY DEDUCTING TDS( i:e 1.60 Crores in our example) AND
Now u tell me that the Indian Co. by INCURRING THE BURDEN OF TAX (in the form of TDS) has dischared their obligation or not..
shailendra
(C.A. FINAL)
(189 Points)
Replied 05 January 2010
Dear Amir sir,
Clauses contained in the agreement does not affect the provisions contained in the law. Here, if service provider won't have mentioned that TDS is to be borne by indian company then also liability would be on the indian company.
Service tax is always calculated on the gross amount charged for the service rendered and here the non resident is charging only Rs. 2cr. for the service.
NARENDER PAWAR
(CA final Student)
(337 Points)
Replied 05 January 2010
we charge service tax on rs. 2 crore @ 10.3% after that wwe deduct tds @ 30%
Amir
(Learner)
(4016 Points)
Replied 05 January 2010
Dear Shailender,
I Know that clauses in agreement can have no effect on clauses in law..I mentioned it to convey the fact that NR HIMSELF IS PRIMARILY LIABLE FOR TAX AND BY DISCHARGING HIS PORTION OF TAX INDIAN CO. HAS DISCHARGED THE OBLIGATION OF NR...
CA. Vipin Gupta
(Accounts Officer)
(146 Points)
Replied 06 January 2010
Mr. Amir and Shailender
the fact is that indian co. is bearing TDS as well as Service Tax
So in my view TDS as well as service tax should be deducted on 2 Crore only
because language in section 195 of IT act says that tds should be deducted on income credited to the account of payee and obviously the service tax is not his income. in case of residents we deduct tds on gross billing including service tax because we are paying the whole amount to payee only. (treating the language as any sum paid)
and in case of service tax we should also charged service tax on 2 crore as obvioulsy tds is not the obligation of NR hence it can not be considered as additional consideration.
Billing : 2 Crore
Add : Service Tax @ 10% : .2 crore
add : tds @ 10%: .2 Crore
Total Obligation : 2.4 Crore
please correct me if i am wrong ?
Analysis of 20 GST Notices (including 2 Appeals) and Practise on Drafting(with recording)
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