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Service tax & TDS on foreign consultancy

CA Shyam Sunder Agarwal (CA) (103 Points)

01 September 2011

Dear friends,

Your advise is required in the matter of payment of Service Tax and TDS on Foreign consultancy.

Say we have made payment of $1000 in the month of Aug'11 towards consultancy fees to one of our US party. Applicable Service tax rate is 10% & TDS rate is 20% on such consultancy. Please tell me how much I need to deposit towards Service Tax & TDS in the month of Sep'11. Exchange rate Is45.00

Thanks & regards,

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3 Replies

DIVYANG GUPTA (Student) (27 Points)
Replied 01 September 2011

Amount of Remittance	$1,000
Exchange Rate	45
Remittance in INR	45,000
Service Tax( @ 10.3% on 45000) as reverse Charge	4,635
TDS if Born by Company(Exclusive)	9,000
TDS if Born by Foreign Party(Inclusive)	7,500
TDS is deducted on amount of remittance ,that’s why Service tax is not included in above TDS calculation

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CA Shyam Sunder Agarwal (CA) (103 Points)
Replied 01 September 2011

DIVYANG Thanks for your reply.

I would like to make clear that we have already make full payment of $1000 to party. Now TDS & Servise tax on above shall be born bu us. As per my knowledge TDS laiblity is as follows:-

Grossing up of the payment u/s 195A = 45000 / 80% i.e. 56,250/- So difference of Rs 56250-45000=11250/- is our TDS liablity. ( ignore cess )

& service tax on above Rs 56,250/- @ 10.3 % i.e. 5794/-.

Please comment & express views...

DIVYANG GUPTA (Student) (27 Points)
Replied 01 September 2011

Dear, service tax & TDS is different matter,reverse charge will be on the amount of remittance not on the amount inclusive of TDS deposited as grossing up . Refer Rule 7(1) ofService Tax (Determination of Value)Rules,2006. saying "The value of taxable service received under the provisions of section 66A, shall be such amount as is equal to the actual consideration charged for the services provided or to be provided "




Simply, how much has been charged by foreign party ,not how much it cost us.
Amount of Remittance		$1,000
Exchange Rate		45
Remittance in INR		45,000
Service Tax( @ 10.3%)		4,635
TDS if Born by Company(Exclusive)		11,250
TDS if Born by Foreign Party(Inclusive)		7,500
TDS is deducted on amount of remittance ,that’s why Service tax is not included in above TDS calculation

Sorry for the mistake while calculating amount of TDS .