As serive tax is payable by service receipeint in case of foreign payment (services) on reverse charge method.
My querry is whether the TDS amount which is deducted from foreign payement is included in the calculation of service tax becase TDS is also borne by service receipeint and paid to govenment account.
Example:
Sevice charge by the foreign service provider = Rs 100
TDS is deducted (paid by receipeint) = Rs 10
Service tax liability :
1. Rs 100 X 10.3% or
2. (Rs 100+Rs 10) X 10.3%
If TDS is borne by the service recepient (payer of charges), then the TDS is grossed up and paid. Therefore for calculation of the service tax you do not add 100 + 10 but you add 100 + 12.5. A 10% tax if grossed up and paid is 12.5% and not 10%.
PLEASE HAVE A VIEW ON RULE 4A. THE WEB SITE IS
https://servicetax.gov.in/st-rules.htm
SERVICE TAX IS CALCULATED ONLY ON SERVICE CHARGES MENTIONED IN THE INVOICE
.
thanks.......
| Originally posted by :EKALABYA TALUKDAR | ||
| " | PLEASE HAVE A VIEW ON RULE 4A. THE WEB SITE IS https://servicetax.gov.in/st-rules.htm SERVICE TAX IS CALCULATED ONLY ON SERVICE CHARGES MENTIONED IN THE INVOICE . |
" |
in this link updated only upto Aug2008... is there any more changes in it after that.....
Service tax is not only on what is written in the invoice. If you have borne TDS on payment to a foreign provider in your P&L Account you are increasing the fee amount by the grossed up TDS to claim the expense. By accounting standards you are not debiting the TDS to a seperate expense account. If you do that it will be disallowed in Income Tax. For income tax you jack up your expense with the TDS amount. If you have taken a technical consulatancy and the bill is $1000. If you deduct TDS of $ 206 (incl cess) you are paying service tax at $103 (including cess) as bill amount is $1000. If you bear the TDS you will have to gross it up to $250 + 7.50 (cess). Obviously you will show $1257.50 in your P&L A/c as Consultancy Fee and you will not show TDS as a seperate head of expenditure. Therefore you will have to pay service tax on $1257.50 and not $1000. Your Invoice amount is deemed to be grossed up to $1257.50 as you would charge that entire amount to P&L. Likewise if a person bills you $1000 but you decide to pay him $900, you bear service tax on $900 and you adjust his invoice with debit note or take credit note from him. You do not have to pay on invoice value as that has been reduced by adjustment.. Grossing up an invoice is as good as an adjustment by crediting the service provider with more fees. The invoice is adjusted upwards for TDS purpose.
Therefore Eklabyaji, I beg to differ. Santoshji, you being a student I have elaborated so much. However you please ask your sirs etc. their opinion. I am not any professional but my son, like you is aspiring to be one. Therefore in order to guide him properly in addition to all his coaching etc., I go through this forum and as far as possible I will discuss till a clarity is there. Remember one thing. You are qualifying for CA not on the basis of knowing everything to the full stop as far as acts and rules are concerned. You have to use too much of presence of mind to become one. All the best.
Thank you Sunil sir, I agreed with you...... Tax and Accounts are my favourite subjects, that's why i would like to know more about these.......... your clarifications are very nice sir....
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