Hello Rajinder Singla,
As per my knowledge I would like to enlighten that:
- There is a single GST rate applicable on IT software which includes all kinds services, products, supply on media, electronic download and temporary transfer of Intellectual Property (IP) is 18% with full Input Tax Credit (ITC).
- As per Section 194J of I.T Act, 10% TDS is deducted on the purchase of software from a resident.
- And if the purchase of software is from a non-resident, TDS shall be deducted under section 195 of I.T Act, 1961 at the rates in force i.e. @ 25% as provided in section 115A which provides for tax on dividend royalty and technical service fees in the case of foreign companies or if relevant DTAA provides lower rate then, that rate shall apply instead of 25%.
- As per Section 40(a)(ia) of I.T Act, 1961 enumerates that where any sum is payable to a resident on which TDS is deductible:
- Such TDS has not been deducted.
- After deduction, has not been paid on or before the due date specified in section 139(1).
- Then 30% of any such sum shall be disallowed in computing the income of that previous year.
Therefore, on the cost of Rs. 5,00,000 - GST of 18% i.e. Rs. 90,000 shall be applicable.
Also, considering the app developer being a resident, and on the cost of the app of Rs.5,00,000 as you mentioned and you fail to deduct the TDS of Rs 50,000 as per Section 194J then 30% as per the provisions of section 40(a)(ia) i.e. Rs.1,50,000 shall be disallowed to you.
So, I recommend you deduct the TDS and pay the amount so that you need not pay tax on the 30% disallowed amount of Rs. 1,50,000.