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service tax on foreign remittances

krishna iyer (Sr.Finance Manager) (197 Points)

10 December 2010

kindly advise,

For services received from foreign consultants, who do not have any permanent establishment in India, we are required to pay withholding tax and service tax.

Value of services - USD 1000 say Rs.45000/- withholding tax 10% Rs.5000/- whether as service receiver, we need pay service tax @ 10.3% on Rs.45000 or Rs.50000/-

Kindly advise relevant sections/circulars

regards

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8 Replies

sankalp (Tax Consultant ( Income Service Sale Tax )) (107 Points)
Replied 10 December 2010

As per rule 2(1)(d)(iv) of Service tax Rules, person liable for paying the service tax means - in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under section 66A of the Act, the recipient of such service. Thus, person receiving service in India will be liable to pay service tax. He will have to register under Service tax provisions and submit returns. Service receiver was made liable to pay service tax on services provided by non-resident by amending rules on 16-8-2002. In cases prior to that, it was held that service receiver cannot be made liable to pay service tax in case of services provided by non-resident.

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krishna iyer (Sr.Finance Manager) (197 Points)
Replied 11 December 2010

thanks for the reply. my specific query may be answered- whether service tax to be paid on gorss-up figure (including withholding tax paid by me)

sankalp (Tax Consultant ( Income Service Sale Tax )) (107 Points)
Replied 12 December 2010

Service tax to be paid on gorss-up figure (including withholding tax paid by you ) Yes !

krishna iyer (Sr.Finance Manager) (197 Points)
Replied 13 December 2010

thanks Mr. Sankalp for the prompt reply. I just want to know whether the provisions of Act is clear on this or there is any Dept circular clarifying this

Ganesh (CA) (111 Points)
Replied 13 December 2010

Dear Krishna Iyer,

Hope this helps. Please Refer Frequently Asked Questions on Service Tax issued by CBE & C in Dec. 2007.

3.12 When payment is made by a client to an assessee after deducting his Income Tax liability under the Tax deduction at source (TDS) provision, whether the Service Tax liability of the assessee is only towards the amount actually received from that client or tax is to be paid on the amount including the Income Tax deducted at source also?

Service Tax is to be paid on the gross value of taxable service which is charged by a Service Tax assessee for providing a taxable service. Income tax deducted at source is includible in the charged amount. Therefore, service Tax is payable on the gross amount including the amount of Income Tax deducted at source also. Thanks, Ganesh.

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krishna iyer (Sr.Finance Manager) (197 Points)
Replied 14 December 2010

thanks Ganesh

Sanjeev (Head) (27 Points)
Replied 27 September 2012

Gentlemen Kindly Advise,

We are an online arm of an Indian media company having our servers abroad for serving web pages. The hosting company is a non resident entity in India, without a pan no. We gross up payment to deduct 20% TDS. Are we also liable to gross up for service tax? The point here is our servers are abroad, though we pay from India, and hence the services are delivered not in India?

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 27 September 2012

Replied same query elsewhere. Maybe examine wehther the same is for selling space ior time for advertisement andif so not liable as in negative list only sale of space or time on TV/ Radio liable.