GST on TDS, Goods and Services Tax - GST

[Kaustubh Karandikar]

XYZ received services from a foreigner where the invoice value of the foreigner is say 100 $ (INR say Rs. 8000. XYZ separately paid TDS on the same to the Indian govt. say of Rs.1000/-. XYZ is required to pay GST under reverse charge on import of service on Rs.8000/- or Rs.8000/- + Rs.1000/- i.e. on Rs.9000/-?

Posts / Replies

[Jasmat Jidiya]

Required to pay GST under RCM on consideration including TDS amount. i.e.9000/-. TDS amount is indirectly payment to the supplier of services and it is a part of consideration.

[KASTURI SETHI]

Dear Sir,

Pl. see para no.4(k) of SOP dated 27.12.2018.

[Kaustubh Karandikar]

thanks Kasturi ji for your help

[Kaustubh Karandikar]

Thanks Jasmat ji for your advice.

[Amit Agrawal]

First, I am presuming that 'TDS' referred in the query is TDS under Income Tax Act and not under GST Act.

In this regard, following observations by tribunal - in case of M/S. VSL INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI (2023 (3) TMI 802 - CESTAT CHENNAI) - are worth noting

"24.1 Now, we shall consider the issue of includability of TDS amount in the value of taxable services. Section 195 of the Income tax Act, 1961 deals with Tax to be deducted at source when payment is made to non-residents or foreign companies. This is basically to plug revenue loss that may occur if by any chance the non-resident doesn’t file income tax return in India. Further, under said section, such sum alone is taxable which has the character of ‘income’. Thus, 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. It is not uncommon that any business contract/agreement inter-se parties primarily focuses on the value/consideration and then spells out as to who would bear the TDS obligation. This cannot be construed as to mean that TDS is also a part of such value/consideration. This is also because, any value/consideration agreed upon is strictly the choice of the parties but the TDS depends on the rate in force at the relevant point of time.

24.2 Thus, when it is contended that the assessee ‘grossed up’ the TDS, it is understood to mean that the assessee has indeed received only the amount as agreed towards value/consideration and the expenditure towards TDS are met by the assessee. So, when such TDS is not received from the non-resident since it is not towards value/consideration, there is no merit in requiring such assessee to include even the TDS it paid in the value of services, as in the case on hand. There is an argument advanced for the Revenue that as per the terms of agreement, it is for the appellants to bear the TDS and thus it is to be treated as part of the consideration. We are unable to yield to the said contentions since in such agreements where one is a non-resident and such non-resident doesn’t have any PE, then it becomes the responsibility of the other party who is an Indian resident, to meet with the TDS obligation arising on account of the agreement in question. Even if such clause is not there in the agreement, still the resident cannot escape the tax liability and hence it becomes incumbent upon it to deduct tax at appropriate rate, at source, before making the payment. We find that the decisions relied upon by the appellant support our above view."

So, it is clear that TDS per se is not included in the term 'consideration' (as generally understood) in given situation.

One may also refer the followings:

(a) M/s. Magarpatta Township Development and Construction Co. Ltd. v. Commissioner of Central Excise, Pune-III [2016 (3) TMI 811 – CESTAT, Mumbai]

(b) M/s. Hindustan Oil Exploration Co. Ltd. v. Commissioner of G.S.T. & Central Excise [2019 (2) TMI 1248 – CESTAT, Chennai]

(c) M/s. Gayatri Hi-Tech Hotels Ltd. v. Commissioner of Customs, Central Excise & Service Tax, Hyderabad-I [2022 (5) TMI 141 – CESTAT, Hyderabad]

(d) M/s. T.V.S. Motor Company Ltd. v. Commissioner of Central Excise & Service Tax, Chennai [2021 (9) TMI 81 – CESTAT, Chennai]

However, one needs to evaluate this question a fresh from point of provisions of GST law (which I will try to cover in my next post ..... need some time).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

No TDS on GST----Board's Flyer No.48 dated 1.1.18