please calculated TDS and Service Tax

Dear Vipin ,

Lets Assume that TDS rate is 20% and Service tax rate is 10% (FOR SIMPLICITY I M IGNORING EDUCATION CESS, ETC)

Now First we have to Gross it up by applying TDS Rate since TDS is to be borne by Indian Co.,

i:e 2 crores / 80*100 = 2.50 crores 

So, Indian Co has to deposit 0.50 crores as TDS

Further Indian Co. Has to Deposit Service Tax as well @ 10%

Therefore, 10% on 2.50 Crores = 0.25 Crores will be deposited as Service Tax

thanks Amir for your time

But you are applying service tax on TDS amount also. in my View service tax also  should be on 2 Crore only

Dear Vipin,

If u look at the other side that "gross(payment + tds) amount of service which u have availed or the gross(payment+tds) amount which u will be debiting to your profit/lpss a/c"

According to me Service tax will be deposited on the amount of tds also..(because by depositing tds u r simply discharging the obligation of the service provider and tds amount will constitute as additional consideration in this case and hence liable to service tax)

Agree with Vipin.Service tax will be on Rs. 2cr and then TDS will be deducted on the bill amount + service tax

Originally posted by : FATEMA
	Agree with Vipin.Service tax will be on Rs. 2cr and then TDS will be deducted on the bill amount + service tax

MR. AMIR IS RIGHT IN HIS VIEW.

TDS should be deducted on BILL  AMOUNT+S.T. , thsi is general practice and consired as unobjected whereas TDS to be there only for bill amount is many a times topic of discussion an objectionable too so for the safer side first opyion is adopted and practice is to apply service tax on baill than TDS is deducted on the BILL+S.T.

so in my opinion the bil should be

Technical Fees 20000000

St 2000000

total 22000000

TDS @ 20% 4400000

this is as per the assumptions of Mr. AMIR

Please correct me if m wrong in getting the question or giving the solution

This solution is as per our practice what i saw in our training period.

Dear Ritu,

The general practice of TDS on Amount including Service tax is followed in casse of Resident;s since they usually recover Service tAx on the invoive & TDS Provision says that it has to be deducted on Gross (including service tax) Amount credit/paid..But in Case of Non Residents/Import of Services there is no one to recover Service tax and hence tds has to deducted on the payment made (exclusive of service tax)..

In my view, Service tax will be calculated on Rs. 2 crore only, because amount of TDS deposited to govt. will not form part of additional consideration to the non resident.

Additional consideration is something waht one person have incurred on behalf of another and some benefit indirectly flows to the another person. Our Income Tax Act and Finance Act 1994 has never imposed the liability of depositing TDS and service Tax to indian govt. on the non resident.

Since it was only the liability of resident assessee to deposit the TDS and service Tax to indian govt. so no benefit flows to the non resident by depositing TDS on the fees paid to him.

Since no benefit flows to the non resident, so no additional consideration is there.

I agree with Amir sir in the view that an amount of Rs. (2cr.+TDS) will be debited to P/L a/c but still service tax will be calculated on Rs. 2cr.

DEAR SAILENDER,

HAD SERVICE PROVIDER NOT INSISTED ON THE CLAUSE THAT "TDS TO BE BORNE BY INDIAN CO" THEN THE INDIAN COMPANY WOULD HAVE MADE THE PAYMENT BY DEDUCTING TDS( i:e 1.60 Crores in our example) AND

Now u tell me that the Indian Co. by INCURRING THE BURDEN OF TAX (in the form of TDS) has dischared their obligation or not..

Dear Amir sir,

Clauses contained in the agreement does not affect the provisions contained in the law. Here, if service provider won't have mentioned that TDS is to be borne by indian company then also liability would be on the indian company.

Service tax is always calculated on the gross amount charged for the service rendered and here the non resident is charging only Rs. 2cr. for the service.

we charge service tax on rs. 2 crore @ 10.3% after that wwe deduct tds @ 30%

Dear Shailender,

I Know that clauses in agreement can have no effect on clauses in law..I mentioned it to convey the fact that NR HIMSELF IS PRIMARILY LIABLE FOR TAX AND BY DISCHARGING HIS PORTION OF TAX INDIAN CO. HAS DISCHARGED THE OBLIGATION OF NR...

Mr. Amir and Shailender

the fact is that indian co. is bearing TDS as well as Service Tax

So in my view TDS as well as service tax should be deducted on 2 Crore only

because language in section 195 of IT act says that tds should be deducted on income credited to the account of payee and obviously the service tax is not his income. in case of residents we deduct tds on gross billing including service tax because we are paying the whole amount to payee only. (treating the language as any sum paid)

and in case of service tax we should also charged service tax on 2 crore as obvioulsy tds is not the obligation of NR hence it can not be considered as additional consideration.

Billing : 2 Crore

Add : Service Tax  @ 10% : .2 crore

add : tds @ 10%:   .2 Crore

Total Obligation : 2.4 Crore

please correct me if i am wrong ?