TDS grossed up is no longer gross amount for service tax

Sir, Section 195A reads: 195A. In a case other than that referred to in sub-section (1A) of section 192, where under an agreement or other arrangement, the tax chargeable on any income referred to in the foregoing provisions of this Chapter is to be borne by the person by whom the income is payable, then, for the purposes of deduction of tax under those provisions such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement." This section creates a legal fiction to take the entire amount paid to foreign entity as net of TDS. Thus, the actual consideration paid remains same and chargeable to ST.

Ramasesha Rao Chepuri 04/04/2016