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Service tax deduction on services provided by foreigncompany

This query is : Resolved 
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(Querist)
28 September 2012 Dear Experts,

If any foreign company is providing services to Public Sector unit in India. So, whether that PSU company is liable to deduct service tax on invoice raise by foreign company as service receiver?

Like if foreign company raises the invoice of Euro 1,00,000. In this case will PSU company in India will pay the foreign company only Euro 87640 after deduction of 12.36% of service tax which comes to 12360 euros. And will deposit euro 12360 with service tax department.

Please advice me on the same.
Thanks in advance.
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MOHAMMAD SALIM

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MOHAMMAD SALIM (Expert)
12 October 2012 Payment to non residents are subject to RCM. thus service recipient is liable to pay tax.

As far as recovery from bill of foreign co. is concerned it depends on terms of agreement. Normally such taxes will be borne by the service recipient thus cannot be reduced from service providers payment.

Hope this would settle the issue....
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