Tds on 'service tax on free of cost material supplied'

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CA Dron Bharadwaj (Querist)
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21 October 2013 Kindly tell me whether TDS u/s 194C is to be deducted on payment of 'Service Tax on Free of Cost Material Supplied' to the Contractor.

@VaibhavJ

@VaibhavJ (Expert)
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21 October 2013 Hi

Yes it is to be deducted on safer side.

Thanks//VaibhavJ

CA Dron Bharadwaj

CA Dron Bharadwaj (Querist)
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21 October 2013 The assessee who's TDS is to be deducted is our client, can we take support of any provision so that TDS is not deducted.

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@VaibhavJ

@VaibhavJ (Expert)
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21 October 2013 Hi

Its same analogy.

When you charge non free item, you deduct TDS on the same right. So when you ship free of cost material & recover only ST then also TDS is applied.

Thanks//VaibhavJ

@VaibhavJ

@VaibhavJ (Expert)
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21 October 2013 Hi,

You can quote:

As per Circular No.4/2008 dated 28.4.2008, it was clarified that TDS on rental
payments would be required to be made only on the basic rental amount without
including service tax.

In other words, TDS should not be made on the service tax portion of the rent. However, this analogy is not applicable to TDS under other sections.

In short - For 194I - Deduct TDS on amount excluding service tax.

For other section - Deduct TDS on amount including service tax.

Thanks//VaibhavJ