Withholding tax and shipping bill

Hi Jayanta,

Regarding your query on withholding tax (WHT) included in CIF invoice value for exports to an African nation and its treatment in the shipping bill:

1. Showing WHT in Shipping Bill:

   • The shipping bill should reflect the actual invoice value as per the export contract, i.e., the CIF value without deducting the withholding tax.

   • WHT is typically a tax deducted at source by the importer’s country and should not reduce the declared export value in the shipping bill.

   • So, the shipping bill invoice value should match the invoice you issue to the buyer (full CIF value).

2. Regulatory Implications of Removing WHT from Invoice:

   • You should not adjust or remove withholding tax from your invoice artificially, as the invoice must represent the true transaction value.

   • The invoice is a legal document; misrepresenting the value can cause issues with customs, export regulations, or tax authorities.

   • If WHT is being withheld by the buyer/importer, that is a separate matter handled in their country and should not be reflected as a deduction in your invoice value.

3. Accounting/Tax Treatment:

   • You can show the WHT amount separately in your accounting books as tax withheld by the foreign buyer.

   • Claim any available credit or refund under applicable double taxation avoidance agreements (DTAA) between India and that country, if applicable.

Summary:

• Declare the full CIF invoice value in the shipping bill.

• Do not remove withholding tax from your invoice.

• Treat WHT as a tax withheld by foreign buyer separately.