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Be aware all Indian importers:

Be aware all Indian importers: Caution for Indian importers if they are not deducting tax of foreign suppliers:

If you are an Indian importer and making outward remittances to your foreign suppliers, then this article is useful to you so that you don't come within legal fault of income tax and not to face legal consequences arising out of default.

You must be aware that if your foreign supplier has a permanent establishment in India or is a tax resident of India then, you are required to deduct withholding tax and deposit the same with the income tax department before making a foreign remittance.

But in case your foreign supplier is not a tax resident of India and not liable to income tax in India due to DTAA benefits or otherwise, then you are not liable to deduct withholding tax while making a remittance to the foreign supplier. For the purpose uptill now you were to obtain a "No PE declaration", "Tax Residency Certificate" and "Form 10F" in physical mode from your foreign supplier and then you were to remit the full payment without withholding tax deduction.

Recently the Directorate of Income Tax (Systems) New Delhi in exercise of powers conferred under Rule 131(1)/(2) of the Income-tax Rules, 1962, has issued Notification No. 03/2022 dated 16th July 2022 mandating, inter alia, furnishing of Form 10F electronically and verification through electronic verification code (EVC). This notification has come into force with immediate effect and henceforth foreign supplier, instead of issuing "No PE declaration", "Tax Residency Certificate" and "Form 10F" in physical mode, has to submit all the three documents electronically online on income tax e-filing portal.

For uploading these three documents the foreign supplier has to first get itself registered on Indian income tax e-filing portal and to get registered itself, it has to obtain the Permanent Account Number commonly know as PAN in India.

So, in short it is now mandatory for any foreign supplier to obtain Indian PAN and get itself registered on Income Tax portal, if it wishes to submit the documents related to not applicability of non-withholding tax in India.

Hence, if your foreign supplier has not yet obtained a PAN and got itself registered on income tax portal, then ask them to do so at the earliest or else you have to deduct tax at source depending on tax treaty or applicable tax rates in India.

For any query or assistance, you may send an email at the id letstalk@mjsheth.com

Author : Manish J. Sheth
Published : 31-10-2022

Disclaimer

This blog is meant purely for educational/research and discussion only to give a general understanding. Any subsequent amendments or changes to the law may change the tax implications. It is not legal advice and should not be treated as such. You may not rely on the information on this blog as an alternative to legal advice from your attorney or other professional service provider. Any use, reference to, distribution or reliance on the content of this blog may be done by reader at their own risk and the author is not responsible for any loss or damage incurred to the reader.

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