TDS or service tax on foreign payments

1. U have to pay service tax on the amount made as payment to foreign company irrespective of turnover.

2. U r making payment on behalf of ur company. Company will reimburse the same to u.

3. There is no limit . U have to pay service tax on each and every payment.

What is the amount of tax payable?

Do i as an individual have to pay service tax or my company pays the same?

What kind of forms do we need to fill up in order to fix this now?

Thanks for your reply!

Dear Viraj,

1. In case of Payment to Foreigners, both TDS and Service tax has to be paid. TDS rates depend upon the fact whether the Foreign service provider is Corporate concern or an individual. As in case of Individuals TDS at 10 per cent plus Education Cess & Secondary & higher education cess has to be deducted. (Total comes to 10.3%).

in case of Corporate Service Provider a 2 per cent surcharge is to be added to tax amount. (Total comes to 10.506%)

Along with this as per Rule 2 (1) (d) of Service Tax Rules, 1994, you are also liable to pay Service Tax @ 10.3% of gross amount.

Thanks, Prabhat

All payments are to companies so i have to pay TDS of 10.506%

And also a service tax of 10.3%

Now the question is, this i have paid via Credit Card (Personal) 

So do I as an individual need to pay this or does my company pay this?

-Viraj

2. As you told that you are employed in the company concerned, you are not the service receiver. It's your company being the actual service receivershould bear the liability to pay TDS and Service tax on the payments to the foreign service provider. You dont have any personal liability towards payment of these taxes. Probably while making tax payments to concerned departments you would be mentioning the Service Tax Registration Number and TAN of your company. There is no problem in making payment from your personal credit card as per my knowledge. Ultimately the amount goes in respect of the STR No. and TAN given in details while making payments.

Thanks once again PRabhat,

No I am a Business Partner for the comany for which i am making this payments via my personal credit card.

Since we are still under 10lac bracket we have not yet applied for a Service Tax number

As a company we only have a PAN Number on which we file our returns

please advice

-Viraj

3. No. There is no threshold limit for such payments. For the purpose of TDS, if you are not deducting and paying the same to the Tax Authorities they become ineligible expenses while calculating Income Tax and then you will have to bear the tax on that amount.

For the purpose of Service Tax, Rules do not provide for any threshold limit. Tax in this case is termed as Service Tax on reverse charge basis. It's the service tax liability of service provider that has to be paid by service receiver. You can Refer Rule 2 (1) (d) of Service Tax Rules, 1994 for more clarity is desired.

Hope this was useful for you.

My advise is that to avoid penal provisions, you should immediately apply for Service Tax Registration and pay service tax on the payments made by you along with interest.

Sorry I didn't notice that you are working with two organisations. It seems that you have not applied for TAN either. Tds payments are to be made through TAN (Tax Deductors Account Number) apply for that also.

Your working with the other organisation has nothing to do with your other Organisation. But clarify one thing, What is the constitution of the Organisation in which you area partner. IS it a Regisatered Company or a Partnership Firm. THere could not be Partners in Companies in technical terms.

i am a partner in that company

I think you are still not getting my question. Whether the organisation in which you are a Partner is registered under Companies Act or Partnership Act. Anyways the liability should be of the organisation.

oh ok so we will do the needful, get the SErvice Tax registration, TiN registration and then pay the tax with penelty whatever applicable

No if you are paying Taxes applicable without being pointed out by tax authorities, you only need to pay taxes alongwith interest. You need not pay any penalty.