TDS u/s. 194C

This query is : Resolved

Rachit (Querist)
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16 February 2010 A contractors raises bill which includes the following elements:

Bill Amount xxx

VAT @ 2% xxx

Service Tax 10.30% xx

TOTAL AMOUNT XXXXXX

QUERY : Whether TDS u/s 194C is deductible on the total bill amount i.e. incl. VAT element (Works contract tax) or excluding VAT amount?

CA Prashant Gupta

CA Prashant Gupta (Expert)
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16 February 2010 if only this information then deduct TDS on full amount.

Rachit

Rachit (Querist)
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16 February 2010 Well that is the safest remedy. But it would amount to deducting TDS on VAT i.e. tax on tax.

Just as there is a clarification by way of circular that in the case of TDS on Rent (sec.194I) TDS is not to be deducted on service tax element, similary is there any case law / circular in the case of TDS on VAT?

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CA Chitresh Gupta

CA Chitresh Gupta (Expert)
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16 February 2010 I Agree with Prashant.

The wording used in section 194C and section 194I is different.

194C refers to "any sum paid" to resident contactor while section 194I refer to "any person responsible paying any income by way of rent".

The term any sum paid includes the vat while income can't include the vat.

Hope this clarifies the matter

regards

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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16 February 2010 Dear Rachit,

TDS on rent exclusive of service tax department given separate exception,but other TDS sections all are inclusive of sevice tax. In your query nature of payment or expenses nature is not clear.so my view also.Inclusive of VAT only