CESTAT rules that service tax is not leviable on the element of withholding tax in case of remittance to Foreign Service provider under a “Net of Tax” arrangement

This alert is on a recent decision of CESTAT in the case Magarpatta Township Development & Construction Company P L vs. CCE.

The CESTAT decision deals with the issue on applicability of service tax under reverse charge mechanism on the amount of income tax (TDS) discharged by the appellant. The Income tax with reference to such foreign remittance for the services procured was to be borne by the appellant.

CESTAT held that the service tax is not leviable on TDS.