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GST on TDS against import of service, Goods and Services Tax - GST
|GST on TDS against import of service|
In continuation of my earlier email on the same, XYZ (India) paying GST under reverse charge on import of service. XYZ also paying TDS under the Income Tax Act on the amount paid to the foreign service provider details of which are given herein below under two different situations:
Situation – 1 (As per the terms of the contract, the foreign supplier wanted full payment as per Invoice Value without any deduction)
Situation – 2 (There was no mention in the terms of the contract by the foreign supplier that he want full payment as per Invoice value without any deduction)
What is he correct position of law under GST?
In my view, under Situation – 1, the GST is required to be paid on ₹. 2452573.32+ ₹ 613143.33. The GST paid under Situation – 2 is correct.
Views of the experts please.
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You have to pay gst on the invoice value without any deduction namely TDS paid to Income tax ue +TDS ampount paid to IT Department.Department. You need not pay gst on invpoice value + TDS amount paid to IT Department. Situation-2 indicates the correct position.
The TDS is a tax obligation which can never partake the character of value or consideration for the transaction or of the goods or of services.”; In turn, CESTAT finds that when TDS is not received from a non-resident since it is not towards value/consideration, there is no merit in requiring a resident (assessee) to include the TDS in the value of services;
Another aspect to note here is that the TDS paid in respect of the services received from a foreign national is at a different footing from the TDS paid in respect of services received from an Indian.
GST liability would not arise for amount of TDS where services received from the foreign national.
It is suggested that suitable changes be made in the agreement in situation 2 in the query (assuming it is not a hypothetical case) to avoid disputes from the department.
Your views are absolutely correct.
1. Under Situation -1, whether XYZ is required to pay GST under reverse charge on ₹. 2452573.32+ ₹ 613143.33 or on ₹. 2452573.32?
Yes. He has to pay GST on Rs.2452573.32+ Rs.613143.33 being the actual consideration.
2. Whether the GST paid under reverse charge under Situation – 2 is correct?
Yes. GST is payable on Rs.613825.17 being the consideration paid
On further thinking,
1. How is the transaction accounted in books of accounts in both scenarios? Pls provide journal entries with amount if possible.
2. How is the transaction reflected in TDS returns?
3. Whether the Foreign entity is taxable in India? are they claiming this TDS?
thanks shilpi ji and Padmanathan ji for your valued advice. Under the Service Tax regime, there was the concept of grossing up of TDS amount in case of import of service where service tax was payable on the grossed up amount. If we extend the same analogy, GST will be applicable under situation - 1. Your views please.
The case shared above indicates that no ST to be paid on TDS.