*E-books/E-Journals/Databases – Subscription/Purchase/Licensing - Tax
Worries of Libraries/Publishers/Agents*
It is appropriate time to re-visit the reply by Mr Madhuresh responding to
a question raised by Mr Jasimudeen of Kerala. What Madhuresh tried to
explain is true but the problem is far complex and requires urgent action
by Library community and Publishers/Agents Associations. The following
developments are important to observe in this context:
1. It is a public knowledge now that last year INFLIBNET was
issued TDS recovery notice by the Income Tax Department in Ahmedabad with
retrospective effect under the amended law of 2012.
2. As most of you would be aware, Informatics stopped handling
orders for e-Journals/e-Books of third-party publishers like Springer,
Wiley etc. except for those publishers who were willing to let us comply
with the amended tax laws of our country in distributing their e-content.
We had to forgo significant part of our e-content distribution business
built over several years due to many foreign publishers’ unwillingness to
accept the orders without TDS deduction. But, that was OK with us, as our
Company has zero tolerance to any violation on matters of statutory
compliances.
3. Developments like the above were the result of an amendment
to Tax Laws in the 2012-13 central budget. The amendment to section 9
(1)(vi) of Income Tax Act that deals with payment of royalties brought
payments for subscription/purchase/licensing of software and databases
under deduction of TDS (10-25% depending on the country) while making
payment. This is draconian and would cripple any buying of e-content if
followed as required by the law. Imagine, if you are paying 200 euro to a
small French publisher who doesn't understand our law, you will have to
deduct 15% as TDS, pay that to the Indian tax department and issue a
certificate to the Publisher along with your payment. The French publisher
is expected to claim this deducted money from his Government using your
certificate! And to qualify for 15% deduction and re-claim it from his
Government, the publisher will have to register with the Tax Department and
obtain PAN. Otherwise, the library will have to deduct 25% and the
publisher will not be able to claim the deducted amount.
4. We at Informatics tried to educate the market against this
bad law, made representations to the Government, requested our big clients,
publishers' associations and library associations to lobby strongly with
the Government for seeking exemption from this amendment for educational
e-content. Unfortunately it was a lone battle.
5. Last year in NIMHANS a group of Librarians arranged a
well-attended seminar and debate on this issue more as a public awareness
seminar inviting Tax consultants and legal advisors. A few publishers from
Delhi also attended.
*FACTS OF THE MATTER:*
6. As per the amended law under Section 9(1)(vi) of Income Tax
Act E-books/e-journals, which are like any computer searchable databases
attract TDS: (a) When Libraries make payment to vendors; or (b) When
Vendors make payment to their Suppliers, whichever may happen earlier.
Vendor or his Supplier can claim the deducted amount while filing his tax
returns depending on the point of deduction
7. In case of purchases from foreign publishers, the matter is
a bit more complex as the deducted amount is a revenue to Indian Government
but not a loss the foreign supplier as he could claim it from his
Government. The complexities are:
(a) The deduction falls under a treaty called Double Taxation
Avoidance Agreement (DTAA) between India and several other countries
(b) While The Indian Government has amended its Tax Laws to bring
payment for software/databases under TDS, the corresponding DTAAs are not
amended.
8. Because the corresponding provisions of DTAA is not amended
foreign publishers/suppliers dispute the applicability of TDS and rightly
so. But, Indian Libraries/Agents will be violating the Indian tax laws if
they fail to apply TDS and will attract penalization by tax department.
9. Indian Agents involved in supplying foreign published
e-books/e-journals are caught in a proverbial devil-and-deep-sea situation.
TDS by Indian Libraries will make their business unviable, as their
commission margins will be invariably less than TDS amount. They can't
accept/place orders if the foreign supplier refuses deduction.
10. For Libraries situation is no different from Agents except
that a few big publishers who have PAN registration in India accept
deduction, but a large majority of foreign publishers refuse deduction.
*SOLUTION*
A. The new Government appears to have an open mind to review the bad laws
of the past that are totally unfriendly to development.
B. The new Government has also recognized e-Libraries as a development
priority in its party manifesto.
C. The Budget session will start soon beginning July 10. Before this date,
Library Associations and Publishers Associations should jointly or
severally submit a strong memorandum to the Finance Minister and HRD
Minister requesting for either rolling back the amended law under section 9
(1)(vi) of Income Tax Act or exempting e-book/e-journal purchases from TDS
deduction.
INFLIBNET, as we understand, is presenting an appeal to the Government
through HRD channels to change this law or exempt libraries from the
applicability of this law.
The knowledge community of India interested in building e-Libraries would
like to solicit the cooperation of all concerned to resolve this matter.
*N.V. Sathyanarayana*
*Managing Director*
*Informatics (India) Ltd, *
*Bangalore. India. *
*www.informindia.co.in http://www.informindia.co.in*
On 23 May 2014 17:31, madhuresh.singhal
Dear Jasim,
As per Indian Tax Law, every foreign payment related to subscribed online resources (Database/Journals) should be done after deducting Withholding Tax (WHT), also known as TDS (Tax Deducted at Source). This tax amount depends on various parameters like whether foreign vendor is giving Permanent Establishment Declaration (a certificate mentioning they don't have any PE in India), TRC (Tax Residency Certificate of resident country) and PAN in India. Also however it is fixed as per IT Law (25% currently), one can take benefit of Double Taxation Avoidance Agreement (DTAA) between India and foreign country. DTAA generally prescribes tax rates like 10% or 15 % and we have the option of taking beneficial position between these 2. So using DTAA provision, we can deduct 15% TDS for countries like USA, UK.
But I am surprised that JSTOR has given you a credit of 15% amount. It looks like they expected that you will deduct 15% tax and accordingly they would have inflated the invoice value to factor this 15%. But when you have not deducted this tax, they would have passed this back to you in the form of credit note. I think you should appreciate JSTOR for this.
I believe, we librarians are still not aware about Tax issues and we are dealing with various publishers without considering the tax implications. In India, tax laws are having retrospective effect, so if you have not deducted TDS any particular year, if caught, you may have to pay for all previous years with penalty. I am not playing devil's advocate here but we should know such regulatory provisions and accordingly deal with publishers. Actually some publishers have acknowledged this and they agreed to deduct TDS.
Regarding Indian Tax Board, they would have meant Indian Tax authorities, where you have to remit the deducted tax.
Regards Madhuresh Singhal Senior Manager - Knowledge Services Advinus Therapeutics Ltd (A TATA Enterprise) 21 & 22, Phase 2, Peenya Industrial Area, Bangalore - 560058 Phone: +91 80 66553106 E-mail: madhureshsinghal@yahoo.com
-----Original Message----- From: lis-forum-bounces@ncsi.iisc.ernet.in [mailto:lis-forum-bounces@ncsi.iisc.ernet.in] On Behalf Of jasim s Sent: Thursday, May 22, 2014 10:42 PM To: lis-forum@ncsi.iisc.ernet.in Subject: [LIS-Forum] Indian tax board-what it is
Dear Friends My colleague received a mail from JSTOR which is reproduced here.Kindly go through it and give a clarification/explain what this "indian tax board".Let me know whether 15% of payment has to without while making payment for subscribing e-resources? mail from JSTOR representative is here...
"Thank you for remitting payment for renewal access to JSTOR journal content. We greatly appreciate your continued support and are delighted that you will continue to provide access to high quality content to your students, faculty, and researchers through the JSTOR platform.
I am contacting you because we noticed that you have a credit on your account in the amount of $140.30 USD. You can use this credit toward new content such as additional journal packages, e-books or current issues.
We would also like to learn more about how this credit may have occurred. We assume that institutions in India must withhold 15% their payments for electronic resources to be remitted to the Indian Tax Board. It appears your institution did not withhold this amount. Is your institution tax exempt or is there some other reason the amount was not withheld?
I look forward to your feedback so that we might better serve you and other institutions in India. Also let me know if I can provide you with more information on additional content that may be of interest to you"
Jasimudeen s Kerala www.jasim.in
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