We are shortly going to sell on-line work-style assessment tests to our corporate clients in India, which they would use for their selecting appropriate job applicants as well as for assessing their employees.
We will buy these on-line test packages (accounts) from a USA based party and will sell the packages to our clients in India. Every account will have a predetermined number of tests (headcounts) as per the requirement of the client - this will allow the clints to conduct that many assessmnts.
The entire testing is done on line (on the test provider's server). An Indian client who has bought a test account will be given a log-in ID and password for accessing the testing page on the US based server of the American test provider. The reports will also be automatically prepared on-line and emailed to the client by the server. No human intergference is involved. Whenever one of our clients will need such testing account, we will buy it with the required headcount and provide it to the client. If the client exhausts all the test headcounts within 1 year and needs more we will buy additional numbers from the provider and provide it to the client.
The provider will invoice us on every sale based on an agreed upon rate. We will also invoice our clients as per the rates we have agreed with the client.
We think this is purely buying a product from an overseas (non resident) party and selling it in India. The only difference is that the product is delivered on-line. Each account will be accompanied with a user manual and we will provide some training in how to interpret the reports. Now our questions are:
1. Do we have to deduct TDS before making payment to the US party?
2. If not, shall we need a CA's certificate to make the payment?
3. If TDS is not applicable, will it attract any kind of import duty?
4. Do we have to pay sales tax or VAT for selling it to our client in India?
5. Or should we only pay service tax on the amount charged from our cliient for providing training?
I know these are a lot of questions, but all very important to us for which we are urgently looking for answers. We will greatly appreciate your considered opinion on this.
Thanks,
Sugato
CAclubindia
