Tds & service tax
This query is : Resolved
19 September 2014
If the foreign company is paid the transportation cost which is service provided by foreign company (transporter) and the same cost charged to the INDIAN Company than TDS & SERVICE TAX is applicable for that cost??
19 September 2014
who is exactly paying to whom?
22 September 2014
foreign company is paid to transporter and the same amount is collecting from the Indian company
28 July 2025
Thanks for clarifying! So, the situation is:
* Your **company pays a foreign transporter** (foreign company) for transportation services.
* Then your company **recovers that transportation cost** from an Indian company.
Here’s how TDS and Service Tax apply in this case:
---
### 1. **TDS on payment to foreign company**
* Under **Section 195** of the Income Tax Act, when you pay a non-resident (foreign company) for services, **TDS is applicable** on the amount paid if the income is taxable in India.
* Since transportation services are being **utilized in India**, TDS is generally applicable.
* The **rate of TDS** will depend on the **DTAA (Double Tax Avoidance Agreement)** between India and the foreign company’s country.
* Also, the foreign company may not charge Indian service tax, but the Indian payer must deduct TDS.
---
### 2. **Service Tax applicability**
* Since the service provider is a **foreign company located outside India**, and the service is a **taxable service used in India**, service tax may apply under **Reverse Charge Mechanism (RCM)** on the Indian company receiving the service.
* The Indian company **must pay service tax under reverse charge** on transportation service received from foreign transporter (if service tax on such services is applicable).
* Your company paying the foreign transporter **does not charge service tax** (foreign company outside India), but your Indian company may be liable under reverse charge.
---
### 3. **Recovery from Indian company**
* When you recover the transportation cost from the Indian company, it's just a **reimbursement** or pass-through.
* You should **not deduct TDS again** on this recovery from the Indian company because it’s a pass-through of the same expense.
* Service tax on this recovery depends on whether this recovery is treated as a service to the Indian company or just reimbursement. Usually, **if it's a genuine reimbursement without markup, no service tax is applicable on this recovery**.
---
### Summary:
| Transaction | TDS Applicability | Service Tax Applicability |
| ---------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------------------------------------------------- |
| Payment by your company to foreign transporter | TDS deductible under Section 195 on payment to foreign company | No service tax charged by foreign transporter, but Indian company may pay under RCM |
| Recovery of cost from Indian company | No TDS on recovery (pass-through) | Usually no service tax if genuine reimbursement |
---
If you want, I can help draft entries or compliances for this! Would you like?
* Your **company pays a foreign transporter** (foreign company) for transportation services.
* Then your company **recovers that transportation cost** from an Indian company.
Here’s how TDS and Service Tax apply in this case:
---
### 1. **TDS on payment to foreign company**
* Under **Section 195** of the Income Tax Act, when you pay a non-resident (foreign company) for services, **TDS is applicable** on the amount paid if the income is taxable in India.
* Since transportation services are being **utilized in India**, TDS is generally applicable.
* The **rate of TDS** will depend on the **DTAA (Double Tax Avoidance Agreement)** between India and the foreign company’s country.
* Also, the foreign company may not charge Indian service tax, but the Indian payer must deduct TDS.
---
### 2. **Service Tax applicability**
* Since the service provider is a **foreign company located outside India**, and the service is a **taxable service used in India**, service tax may apply under **Reverse Charge Mechanism (RCM)** on the Indian company receiving the service.
* The Indian company **must pay service tax under reverse charge** on transportation service received from foreign transporter (if service tax on such services is applicable).
* Your company paying the foreign transporter **does not charge service tax** (foreign company outside India), but your Indian company may be liable under reverse charge.
---
### 3. **Recovery from Indian company**
* When you recover the transportation cost from the Indian company, it's just a **reimbursement** or pass-through.
* You should **not deduct TDS again** on this recovery from the Indian company because it’s a pass-through of the same expense.
* Service tax on this recovery depends on whether this recovery is treated as a service to the Indian company or just reimbursement. Usually, **if it's a genuine reimbursement without markup, no service tax is applicable on this recovery**.
---
### Summary:
| Transaction | TDS Applicability | Service Tax Applicability |
| ---------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------------------------------------------------- |
| Payment by your company to foreign transporter | TDS deductible under Section 195 on payment to foreign company | No service tax charged by foreign transporter, but Indian company may pay under RCM |
| Recovery of cost from Indian company | No TDS on recovery (pass-through) | Usually no service tax if genuine reimbursement |
---
If you want, I can help draft entries or compliances for this! Would you like?
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