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TDS Deduction when vendor is outside India, but have PAN and GST

Vikram (Proprietor) (100 Points)

07 January 2022

Hi,

We are taking services from a US based company for Web Hosting Servers. We pay monthly fees and pay GST on Reverse charge mechanism. Wanted to know under which section we need to deduct TDS and how much percentage?

The address of our vendor is USA as below. They have PAN and GST number.

DigitalOcean LLC
101 Avenue of the Americas, 10th Floor
New York, NY 10013
PAN: AAFCD8404R
GST number: 9917USA29005OS9

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8 Replies

sabyasachi mukherjee (27574 Points)
Replied 07 January 2022

Pls explain more.

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Vikram (Proprietor) (100 Points)
Replied 07 January 2022

Basically DigitalOcean is our vendor and we need to deduct TDS. But since the service provider is US based, we are confused about which section the TDS should be deducted. TDS @ 10% for technical services under section 194J or any other section as the vendor is outside India.

anil jain (Partner) (1072 Points)
Replied 07 January 2022

Pl clarify,

Does your supplier do any activity in India in relation service provided to you ?

Does supplier has PE in India?

Vikram (Proprietor) (100 Points)
Replied 07 January 2022

Yes Supplier provide Web Hosting servers to India.
Supplier is a US company and doesn't have any PE in India. The have provided No Permanent Establishment declaration.

But supplier has a PAN number provided by Indian.

anil jain (Partner) (1072 Points)
Replied 08 January 2022

In my opinion,

If supplier provides services from US and does not have PE in India, its income is not taxable in India hence TDS is not applicable.

Other experts, pl comment.

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sabyasachi mukherjee (27574 Points)
Replied 11 January 2022

Incidence of taxation is important.
Income deemed to accrue or arise outside India for services outside India. Hence not taxable in India.
Tds not deductible.

ravi kumar (24 Points)
Replied 19 February 2022

Dear sir,

Can you please help me with one more question, mujhe director ka TDS deduct kar ke government ko jma krna hai, to kya mujhe uska remuneration ko salary ki trah slab rate ke according calculate kar ke deduct krna hoga or ITNS 281 me jma krna hoga ya fir mujhe direct directors ke total remuneration pe 10% TDS deduct kar ke ITNS-281 me section 194j ke teht jma krna hoga,

Please help me, sir.

Sowmya.G (CA) (504 Points)
Replied 16 June 2022

Dear Vikram, From your query, I understand that they hold a PAN number. Probably they should have a permanent establishment in India. How the invoicing is done?