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TDS on Ocean Freight paid by CHA and claimed in his CHA Bill

M. SIVAKUMAR (Manager-Accounts) (76 Points)

24 February 2011

Dear All my freinds.

Please clarrify me regarding the applicability of TDS on the CHA bills where the CHA is claiming the Ocean Freight against our export in the same of their CHA charges and others. Presently I am deducting TDS on Total Bill value. Is it correct and kindly clarrify

With Warm Regards

M.Sivakumar

Goa

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12 Replies

CMA M.S. Venkatesh Babu (Cost Accountant) (56 Points)
Replied 24 February 2011

Dear Siva,

If CHA gives combined bill for reimbusements and service charges, TDS has to beducted on whole bill.

However,if separate debit note is issued for reimbursements and service charges bill is issued separately then TDS is applicable on the bill amount only and not on the debit not.

1 Like

SURIBABU (MANAGER ACCOUNTS) (28 Points)
Replied 24 February 2011

Dear SivaKumar,

I agree with opinion expressed by Mr.Venkatesh Babu

Indigo (-) (533 Points)
Replied 24 February 2011

i partially agree. see even if it is raised thru a debit note still its a expense. ocean Freight is subjected to tds unless and until the ocean freight provider is exempted u/s 173 of IT Act or has a TDS non Deduction certificate issued by IT Dept. else such portion is subject to tds as contract nature.

M. SIVAKUMAR (Manager-Accounts) (76 Points)
Replied 24 February 2011

Dear Indigo,

From your point of view, we can take the Ocean Freight as a Freight agreed to the Contractor (Shipping Line) to carry goods on our behalf where the Sec 194C will apply. Hence the TDS on Ocean Freight is to be charged.

Dear Mr. Venkatesh & Mr. Suri - please give your views

With regards

M.Sivakumar

CMA M.S. Venkatesh Babu (Cost Accountant) (56 Points)
Replied 25 February 2011

Dear Siva

The statement of the shipowner that they are exempt from tax is not entirely correct. There is specific provision u/s 172 of the I T Act to assess “shipping business of non-residents”. However, there may be cases that income of foreign ship may not be taxable in India on account of Double Taxation Avoidance Agreement with the country of origin of the ship.

There are three provisions which are to be considered for deciding the issue whether the tax is to be deducted at source.

Section 172 provides for Assesement of profit of shipping business of non resident ;
Section 194C : deals with TDS on contract or sub-contract.Freight is one of them.
Section 195 : deals with TDS on any sum paid to non resident

Section 194C is definitely not applicable , because that provision applies only in case of residents . That leaves us Section 172 and section 195 . While section 172 is not related to TDS , the issue becomes simple if the TDS on freight payment to non resident shipping companies has to be made. The answer comes from following Board circular no 723 dated 19/9/1995 which clarifies that TDS should not be made in case of non resident shipping companies as they are being assessed u/s 172.

1 Like

Indigo (-) (533 Points)
Replied 26 February 2011

so is it the ocean freight is not covered under TDS? plz substantiate rather just concluding sec 172 which is related to shipping biz so only i called for non deduction certificate issued by dept on such case. how abt the shipping company having a PE in india or branch in india?

M. SIVAKUMAR (Manager-Accounts) (76 Points)
Replied 01 March 2011

The discussion may include that the TDS may need not to be deducted from the liner on Ocean Freight by providing the Exemption Certificate. Some Times, what we practically doing are not supported by the IT Law, for e.g. TCS .. I have still a very big question of Deducting TCS on Deemed Exports. No clear picture on the laws.

-Sivakumar

Goa

Indigo (-) (533 Points)
Replied 02 March 2011

check with party then take final call. unless they are foreign nation frt provider and payment r in foreign currency v likely they may be assessed here. on general v cannot conclude ocean frt is tds exempt

NAGAMANI (BUSINESS) (43 Points)
Replied 19 August 2013

Dear freinds,

I have got some input to your discussion. We are exporters and we pay ocean freight. Even we do not deduct any TDS on ocean freight. But recently, a freight agent has given a certificate u/s 197(1), for deduction of tax at lower rates. So, it means TDS on ocean freight needs to be deducted.

regards,

NAGAMANI

damoder (student) (23 Points)
Replied 29 September 2013

Dear All my freinds. Please clarrify me regarding the applicability of TDS on the CHA bills where the CHA is claiming the Ocean Freight against our export in the same of their CHA charges and others. Presently I am deducting TDS on Total Bill value. because CHA agent is not give to me ocean freight bill seprately. it ias correct and kindly clarrify With Warm Regards
damodar saraswat

jovita (accountant) (25 Points)
Replied 09 April 2015

Dear Friends,

1. I am working as accountant in a CHA. Till now we have not deducted TDS on liner payments. Will it be a problem? How can one find out which liner is Indian and which liner is foreign?

2. Some of our clients deduct TDS on the total bill amount (including the liner charges). Some clients deduct TDS only on our service charges. Which is correct?

Plz advice...

RAM SUNDER Singh (2 Points)
Replied 26 November 2019

To me, liability of deduction should be determined on the status of service provider and service receiver.

If CHA is receiving services from non-resident Shipping company and providing the service to Exporter , TDS should be decuted.

It is not only the TDS whereas GST liability come into play to decide who is liable for payment of tax under RCM on Ocean Freight .

Before parting-

The status of service provider and service receiver ( whether Resident or Non-resident) means a lot for assessment and payment of tax either under Income Tax or GST Laws.