Service Tax and TDS in case of recepient of foreign service

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My client is a banking concern and has received services from a foreign company. as per the agreements my client was required to pay a certain ascertained amount to the service provider and the service provider has remitted the balance amount after withholding his charges to my clients account. My client has post receipt paid to the credit of the government the TDS as a % of the sum withheld by the foreign service provider. ( Back working as 10/110). 

The client also had to pay service tax on the receipt of service and had paid 10% of the sum withheld by the foreign service provider and had ignored the TDS part. Now the dept (ST Dept) has raised a demand notice demanding for the service tax portion on the TDS amount also.

My query is in the present scenario are we liable to pay service tax on the TDS portion as Service Tax is to be paid on the Gross Bill amount as charged by the service provider.

What would constitute the Gross bill and is TDS excluded from the said amount as it has been voluntarily paid by the banker and is actually not income in the hands of the foreign service provider.

Regards

Adhithya Srinivasan

Replies (1)
Originally posted by : Adhithya


My client is a banking concern and has received services from a foreign company. as per the agreements my client was required to pay a certain ascertained amount to the service provider and the service provider has remitted the balance amount after withholding his charges to my clients account. My client has post receipt paid to the credit of the government the TDS as a % of the sum withheld by the foreign service provider. ( Back working as 10/110). 

The client also had to pay service tax on the receipt of service and had paid 10% of the sum withheld by the foreign service provider and had ignored the TDS part. Now the dept (ST Dept) has raised a demand notice demanding for the service tax portion on the TDS amount also.

- as the client has taken burden of TDS part .( i feel its 20.6% for him) and now the service charges gone increased by 20.6 %, and u have to deduct the TDS and pay service tax on increased amount . 

OR 

forget the book entry of TDS amount ........

 



My query is in the present scenario are we liable to pay service tax on the TDS portion as Service Tax is to be paid on the Gross Bill amount as charged by the service provider.

- Yes service tax would be charged inclusive of TDS amount. 


What would constitute the Gross bill and is TDS excluded from the said amount as it has been voluntarily paid by the banker and is actually not income in the hands of the foreign service provider.

Regards

Adhithya Srinivasan


CCI Pro

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