Engineering Export Promotion Council (EEPC) on Thursday alleged that the income tax (I-T) department has sent notices to exporters asking them to subject their foreign agents in overseas to the tax deducted at source or TDS. EEPC said that that the tax department expects overseas nationals to claim the refunds from the Indian tax authorities.

It urged the commerce and finance ministries to remove uncertainty in this regard in the next foreign trade policy. “Even though, there is a High Court judgement that the TDS cannot be levied on the commission earned by foreign agents on exports, the situation is not clear because of certain circulars by the Central Board of Direct Taxes (CBDT). This is causing a lot of inconvenience to the exporters who are finding it difficult to engage agents abroad in this backdrop,” said EEPC India chairman Anupam Shah.

Mr Shah said that several exporters have been receiving notices in this regard. EEPC said that an estimated $15 billion claimed to have been paid as commission to foreign agents. The commission varies between 3 and 5 per cent and India’s total exports are about $312 billion. On this $15 billion, the Indian taxmen would like to impose. This amount can be subject to 10 per cent TDS on the foreign agents.

EEPC said that given the complexities of the international markets, the agents are a must, especially for the small and medium sized exporters who do not have wherewithal to scout for new markets. “How do you expect a foreigner to come and claim the TDS refunds. He is not an assessee in India and yet our taxmen would impose TDS on foreign commission. This is strange and totally not workable,” said Mr Shah.