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Service consumed abroad and in India

V.ganapathy (consultant) (87 Points)

13 June 2011

Is there a difference between these following two cases as far as service tax payment is considered:

1.A who is an induvidual in India provides service to a US company. B (export of service) having no PE or business in India.

He takes the help of a NRI induvidual C to provide some technical information when he is in USA and it is passed on to B. A pays C in foreign currency for his time. C has no office in India.Per DTAA C's income is taxed in USA and not in India. also it is not an income coming under sec 195 for C.

Is it taxable income for C in India? TDS or service tax required to be paid or not?

2.. A gets help of C when abroad for a project in India and pays in foreign currency. here I think it is clear both TDS and service tax are applicable even when A gets the help of C while abroad.

Comments from experts pl.

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Satish (CA Final Student) (479 Points)
Replied 15 June 2011

In the first case, since the service is provided by C outside india & consumed by A outside India for the purpose of export Service, No service tax is leviable on C or need not be paidy by A too. As far as payment of Income tax is concerned, C is a non resident & income is not accrued or arised or deemed to be accrued or arised in India. Hence C will be taxed in US. As far as TDS is concerned, Section 195 (1) clearly states about the income on which tax has to be deducted. It states that "Any sum chargeable under the provisions of this Act". It means, the tax would have been deducted if the sum payble had been accrued or arised in India as the income accrued or arised in india is only chargeable under Income tax Act. So no Tax will be deducted.

In the Second case, The service falls under the Import of service and the Service tax would be payble by A as a recepient of Service & also the tax would be deducted at source as it is the income deemed to be accrued or arised in India for C

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