Service tax & Tds

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

19 December 2010 Dear Experts,

One of the client having mfg unit, is receiving bills for the payment
to the contactor ( security gurad, etc...) as under:

charges for the month Rs.1,00,000

Add: S Tax 10.3% Rs. 10,300

TOTAL Rs. 1,10,300
Add: Reimbursed Exp Rs. 50,000
(Fixed)
BILL TOTAL Rs. 1,60,300

On the above bill party deducts TDS on 1,10,300 @ 2%.

My question is :
1) Is the bill raised correct ?
2) Is tds deduction being correctly followed?
THNX IN ADVANCE

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 December 2010 1) No. service tax is to be levied on reimbursement amount also.
2) No.Section 194C refers to "any sum", thereby reimbursement of actual expenses cannot be deducted from the bill and that such reimbursement will also have to be taken into account in deducting tax at source.
Fixed reimbursement may contain an element of profit which may again worsen the situation.

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

03 January 2011 Dear Expert,

My clients argument is that:
1) Why there will be tds on reimbursed amount, as many of the other firms are following , not to deduct tds on reimbursed amount.

2) Even on service & maintenance chg ( of security & guards), tds deduction is @ 2% U/S 194C, which differs with my argument to deduct tds @ 10& u/s 194J, AS the client argues that for guard service there is no professional or technical involvement is there.?
Thnx in advance

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