Legal Question in Tax Law in India

Dear Sir,

We have got an export order for supply,erection,commissioning of power plant in Malaysia in this regard we would like to know the following.

Facts:

a)The contractor is based in Malaysia.

b)He is registered in Malaysia.

c)He is rendering services in Malaysia

d)He is billing to us (India)

e)He is getting payment from us (India) .

Considering the above, we request your advice on the below queries;

1)Will we deduct any TDS on their bills, if so what is the applicable rate. Also in case the contractor does not have a PAN then what is the rate of TDS deduction.

2)Does India & Malaysia have a �double taxation avoidance treaty�. If yes, can we take any benefit under this.


Asked on 11/23/10, 8:12 pm

1 Answer from Attorneys

Dear ,

I we have already provided you with the opinion on the captioned matter. For your conviniance we are providing it again

A service received in India is said to be Import of service when the service is provided from outside India and received in India. For this the statute has formulated " Taxation of Services ( Provided from outside India and received in India) Rules , 2006.

As per Rule 3 (ii) of the above rules , Services falling under 3 (ii) shall be treated to have been imported when such services are performed in India. Erection , commissioning or installing services falls under the above rule 3(ii) ( Services related to Performance of Service).

Therefore having understood the above , in our view , the present case does not fall under the import of service, because the service is not being performed in India. The service is performed outside India.

Section 66 A would not be applicable.

As regards TDS on Service tax , there no such concept in Service TAx. It is being deduction on the Income of a person under Income TAX ACT. eVEN IF THERE IS ANY DTAA treaty between the two countries, it wont make any difference.

Should you need more clarifications , feel free to contact us.

Regards

Jeevesh Mehta

Advocate ( Taxation & Corporate).

Ph; 09811617186

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Answered on 11/23/10, 10:12 pm


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