Tds u/s 195, & service tax

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This query is : Resolved

Prakash (Querist)

15 February 2013 WE PURCHASED A SOFTWARE DURING 2012-13 FROM A FOREIGN VENDOR. TO RENEW THE USAGE LICENSE FOR THE CURRENT YEAR WE NEED TO PAY THE FEES IN FOREX. THE VENDOR IS NOT A RESIDENT IN INDIA.

MY QUESTION IS
1. WHETHER THE PAYMENT ATTRACT TDS U/S 195.
2. WHETHER WE NEED TO PAY THE SERVICE TAX AS PER RULE 2 OF SERVICE TAX RULES 2012.

PLEASE CLARIFY.

SANJAY TALATI

SANJAY TALATI (Expert)

18 February 2013 As per the definition of service as contained in clause 44 of Section 65B only those transactions are outside the ambit of srvice which constitutes only a transfer of title in goods or such transfer which are deemed to be sale within the meaning of clause 29 A of Article 366 of the Constitution.

"Transfer of right to use goods" is deemed sale under Article 366(29A) of constitution of India and transfer of goods by way of hiring, leasing. licensing or any such manner without transfer of right to use such goods is declared service under clause (F) of Sec. 66E.

Hence, service tax is payable on the reverse charge basis being import of service.

Further, being a technical service, TDS is also attracted. However, the same is subject to the DTAA provisions with the country from which the the Computer software is purchased and the renewal fee is to be discharged.