Tds on new purchase product & separate warranty pack sold.

This query is : Open

Keshav Shikerkar (Querist)
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23 August 2011 Hi,

Scenario 1:
I have one query about warranty pack & its TDS deduction by our customer. When we buy a Cisco Enterprise Switch we buy two things one is product with 5% VAT and 1 Year or 3 Year Warranty Pack separately which will attract 10.3% Service Tax from the National Distributor in India.
Now customer deducts 2% VAT TDS on entire Product sale Value (Product + Warranty Pack) along with 1% IT TDS. So I want to know is it right or there is mistake happening from our customer. As per our knowledge both this sales are Product Sales only.
Scenario 2:
Sometime if we sale the HP LaserJet printer it comes with 1 Year Warranty customer says give me additional support pack for more two years, so product has on-site support for 3 years. So our invoice will have 1 year product and additional support pack for more 2 years. So how this matter need to be handled by the customer in terms of TDS is concern.
Please guide us on this matter, and let us know if any notification or any gazette is their then what is the No. of that.

Thank you in advance

Keshav Shikerkar,
Network Experts, Goa
09822121443, 0832-2731899

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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24 August 2011 If there is no contract then the TDS will not come if you have not rendered any services then also no TDS will come.

On purchase and sale of goods in ordinary course of business there cannot be any TDS

Sidhardh

Sidhardh (Expert)
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25 August 2011 All individual customers are need not necessarily deduct TDS from Supplier. If the income of Customer (individual / HUF) is subject to audit u/s 44AB in previous year, then only he has to deduct TDS otherwise not. All Corporate assesses need to deduct TDS.

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Keshav Shikerkar

Keshav Shikerkar (Querist)
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25 August 2011 My Company is supplier and my customer is US multinational company based in Goa. My Company is Proprietary concern and we are also audited, under Income Tax & VAT from Last Year. Service Tax income is below 10 Lakhs, service Tax collected will not be more than 2 Lakhs.
When Cisco or its distributor sells they sell it as a product and not as a service. And also when we sell it is product only. If device becomes faulty then only we will get repaired or replace it under warranty pack Terms & Condition for the time period for which customer have purchased the warranty pack period can be of 1 Year or 3 Year Warranty Pack.
If Customer have to deduct TDS ( if yes which VAT TDS or IT TDS) ?
And what about us when we purchase from our supplier should we deduct TDS from them?
As I am confused with above two answers.

Sidhardh

Sidhardh (Expert)
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26 August 2011 I now go through your entire query. Here is the answer:

When the dealer purchase the goods/service of above form, the dealer is not liable to deduct any TDS from distributor. This is simply because there is no contract between dealer and distributor regarding product warranty. And the dealer is not a service receiver from distributor.

The product warranty also not between dealer and customer. It's between the customer and company which manufactures the product. The product may be sold through several outlets with manufacturer warranty. So, the dealer / distributor will not pay any thing from their pocket when the product get repaired.

So, no question of VAT TDS / IT TDS. Sale of goods with warranty or sale of extended warranty's will not attract any TDS.

Keshav Shikerkar

Keshav Shikerkar (Querist)
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13 August 2014 We thought this Problem is Solved but but client is deducting IT TDS under 194J, so can we have experts view and comments on this issue and corresponding Notification No applicable for this.

So as to share with the CA of the company.