Income tax and deemed sale on CST
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 December 2009
Is TDS U/s194I should be made on Machinery hire charges on which CST has been levied by considering the same as deemed sale?
09 December 2009
TDS is applicable as Provisions of Income Tax Act and Sales Tax are different.
Whether you have any invoice which can be shown that the transaction is of sale? If yes, then no need of any TDS. But at that time there will be no hire charges.
Looking to the above; apply which is relevant to you.
CA Rakhecha
Surat
Whether you have any invoice which can be shown that the transaction is of sale? If yes, then no need of any TDS. But at that time there will be no hire charges.
Looking to the above; apply which is relevant to you.
CA Rakhecha
Surat
09 December 2009
I agree with Surendra kumar
Querist : Anonymous
Querist :
Anonymous
(Querist)
18 December 2009
Iam unabletounder stand 2 nd part of reply
please give your valueble response
please give your valueble response
31 July 2024
In the context of income tax and TDS on machinery hire charges, the treatment of Central Sales Tax (CST) and its impact on TDS under Section 194-I requires understanding how CST and TDS regulations interact. Here’s a detailed explanation:
### **1. Central Sales Tax (CST) and Machinery Hire Charges:**
- **Central Sales Tax (CST):** CST is a tax on the sale of goods and is levied on the interstate sale of goods. When CST is levied, it is applicable to the sale of goods and is generally not directly related to service transactions.
- **Machinery Hire Charges:** When machinery is hired out, it is typically treated as a service rather than a sale of goods. Hence, CST is usually not applicable to the hire charges for machinery.
### **2. Tax Deducted at Source (TDS) under Section 194-I:**
- **Section 194-I:** This section pertains to the deduction of tax at source on rent paid for the use of machinery or equipment. As per Section 194-I, any person responsible for paying rent for machinery, equipment, or furniture is required to deduct TDS at the prescribed rates.
- **Rate of TDS:** The rate for TDS under Section 194-I is 2% for rent of plant and machinery and 10% for rent of land or building. The rates are applicable on the amount of rent paid or payable.
### **Interaction of CST and TDS:**
- **CST on Machinery Hire Charges:** If CST is levied on the hire charges, it generally forms part of the total consideration. However, CST is a tax on the sale of goods and is not directly applicable to service charges or machinery rentals.
- **Deemed Sale Concept:** In the context of TDS, the concept of deemed sale does not directly impact the applicability of TDS on machinery hire charges. TDS should be deducted on the total amount of hire charges including any CST if it is separately specified and part of the total consideration.
### **Should TDS be Made on Machinery Hire Charges Including CST?**
- **Include CST in TDS Calculation:** If CST is levied separately on the machinery hire charges, then the total amount including CST should be considered for TDS deduction. TDS should be calculated on the total amount payable (including CST) and not just the base amount of hire charges.
### **Practical Example:**
If the hire charges for machinery are Rs. 1,00,000 and CST at 2% is levied, the total amount payable would be Rs. 1,00,000 + Rs. 2,000 (CST) = Rs. 1,02,000. TDS should be deducted on Rs. 1,02,000.
### **Reference to Section 194-I:**
- **Explanation:** The Finance Act, 2006, made amendments to include TDS on payments made towards the use of machinery and equipment. The legislation mandates that TDS be deducted on the total amount of rent including all applicable taxes.
### **Summary:**
- **TDS Calculation:** Deduct TDS under Section 194-I on the total amount payable for machinery hire charges including CST if applicable.
- **No Direct Link:** The concept of deemed sale under CST is not directly relevant to the TDS calculation but should be included in the total amount for TDS purposes.
**Recommendation:**
- **Consult a Tax Professional:** To ensure compliance with the latest regulations and to get accurate advice tailored to your specific situation, consult a tax professional or a chartered accountant.
Feel free to reach out if you have more questions or need further clarification!
### **1. Central Sales Tax (CST) and Machinery Hire Charges:**
- **Central Sales Tax (CST):** CST is a tax on the sale of goods and is levied on the interstate sale of goods. When CST is levied, it is applicable to the sale of goods and is generally not directly related to service transactions.
- **Machinery Hire Charges:** When machinery is hired out, it is typically treated as a service rather than a sale of goods. Hence, CST is usually not applicable to the hire charges for machinery.
### **2. Tax Deducted at Source (TDS) under Section 194-I:**
- **Section 194-I:** This section pertains to the deduction of tax at source on rent paid for the use of machinery or equipment. As per Section 194-I, any person responsible for paying rent for machinery, equipment, or furniture is required to deduct TDS at the prescribed rates.
- **Rate of TDS:** The rate for TDS under Section 194-I is 2% for rent of plant and machinery and 10% for rent of land or building. The rates are applicable on the amount of rent paid or payable.
### **Interaction of CST and TDS:**
- **CST on Machinery Hire Charges:** If CST is levied on the hire charges, it generally forms part of the total consideration. However, CST is a tax on the sale of goods and is not directly applicable to service charges or machinery rentals.
- **Deemed Sale Concept:** In the context of TDS, the concept of deemed sale does not directly impact the applicability of TDS on machinery hire charges. TDS should be deducted on the total amount of hire charges including any CST if it is separately specified and part of the total consideration.
### **Should TDS be Made on Machinery Hire Charges Including CST?**
- **Include CST in TDS Calculation:** If CST is levied separately on the machinery hire charges, then the total amount including CST should be considered for TDS deduction. TDS should be calculated on the total amount payable (including CST) and not just the base amount of hire charges.
### **Practical Example:**
If the hire charges for machinery are Rs. 1,00,000 and CST at 2% is levied, the total amount payable would be Rs. 1,00,000 + Rs. 2,000 (CST) = Rs. 1,02,000. TDS should be deducted on Rs. 1,02,000.
### **Reference to Section 194-I:**
- **Explanation:** The Finance Act, 2006, made amendments to include TDS on payments made towards the use of machinery and equipment. The legislation mandates that TDS be deducted on the total amount of rent including all applicable taxes.
### **Summary:**
- **TDS Calculation:** Deduct TDS under Section 194-I on the total amount payable for machinery hire charges including CST if applicable.
- **No Direct Link:** The concept of deemed sale under CST is not directly relevant to the TDS calculation but should be included in the total amount for TDS purposes.
**Recommendation:**
- **Consult a Tax Professional:** To ensure compliance with the latest regulations and to get accurate advice tailored to your specific situation, consult a tax professional or a chartered accountant.
Feel free to reach out if you have more questions or need further clarification!
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