Tax on Tax

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

27 June 2010 sir/madam
what will be the right calculation/sequence, when there are VAT, Service Tax and TDS involve in one bill? Which one should cacutate first? Can we consider Tax on Tax?

Kaustuv

Kaustuv (Expert)
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27 June 2010 VAT and service tax will separately be on two different components of the invoice, viz, product and service respectively. And for TDS, for rental income there is specific guidance from IT department that it has to be on an amount excluding service tax. Although, there is no specific guidance in other cases, we can take clue from above that TDS would be on an exclusive amount.

CA Debasish Banerjee

CA Debasish Banerjee (Expert)
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28 June 2010 TDS will be on the gross amount credited or paid. Tax should be deducted on the gross amount of the bill including claim of reimbursement of actual expenses ( Circular 715 dated 8.8.1995)

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Shudhanshu Agrawal

Shudhanshu Agrawal (Expert)
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28 June 2010 There are 2 things

1- VAT, which is levied on the purchase of material. When in the bill or invoice the amount of material purchased in seprately discolsed then TDS (u/s 194C) shall be deducted on amount excluding the amount of material purchased and VAT.

2- Service tax, which is levied on providing services. There was a notification issued by CBDT in 2008 which excludes service tax from the bill in case of Rent (u/s 194I). But in other sections it was silent. Hence in other sections TDS need to be deducted on Gross bill including Service tax.

Although it looks like double taxation but it is not so because TDS deducted is set off against the tax liability of the person and there only actual services or contracts are considered i.e. VAT and service tax are excluded.

Querist : Anonymous

Querist : Anonymous (Querist)

29 September 2011 Supposed, I have purchased goods in Assam with 13.50% VAT extra.
at delivery I paid Rs. 113.50. Additionally I paid Rs. 30 to the carrier as Freight and Service Tax on carrying Rs. (Rs. .78) (30 x 25%) * 10.30%) at my stores it cost Rs. 113.50 + 30 +.78 = Rs. 144.28, Now if i charged VAT when resale the goods, should i exclude Service Tax paid Re. .78 ?