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No tds on service tax

Naina (student) (151 Points)

22 August 2015

why no TDS on service tax?? reason (mischief) behind it?

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8 Replies

Sriram (CMA Final) (178 Points)
Replied 22 August 2015

https://www.simpletaxindia.net/2013/08/tds-on-service-tax-charged-on.H T M L

go thru the link... you will find answer

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CA Sukriti Jain (Senior, EY) (1184 Points)
Replied 22 August 2015

@ sriram. the link you posted is dated 29 august 2013. i would like to add that -CBDT has issued a circular dated 14 january 2014 -TDS on service tax (if indicated separately has been exempted under all section covered chapter XVII-B of the ACT.

Following conditions should be noted given under in new circular 01/2014 dated 13.01.14 to get exemption on TDS on service Tax -

The payement should be made to Resident so all payment made to non residents ,tds is to be deducted including service tax amount.
Service Tax amount payable shall be indicated separately in term of Agreement/Contract between payer and payee.

If both the above condition are stasfied then no need to deduct TDS on service tax part.

CA Sukriti Jain (Senior, EY) (1184 Points)
Replied 22 August 2015

In CIT(jaipur) Vs. M/s. Rajasthan Urban Infrastructure [2013] It was held by the Hon’ble Rajasthan High Court that if Service tax is payable in addition to professional/ technical fees under the contract, the withholding tax(TDS) will be restricted to the professional fees. Hence, examination of contract terms is imperative.

The Hon’ble Rajasthan High Court held that the words “any sum paid” used in Section 194J of the Income Tax Act, relate to “fees for professional services or fees for technical services”. In terms of the agreement, the amount of Service Tax was to be paid separately and was not included in the fees. Hence the orders passed by Appellate Authority as well as the Appellate Tribunal are in accordance with the provisions of Section 194J of the Income Tax Act.

The circular has been issued by CBDT on lines of this judgement only.

If Service tax is not separately indicated on bill, then tds has to be deducted on service tax amount also.

Naina (student) (151 Points)
Replied 22 August 2015

Yes, Thankyou sriram and sukriti! But my doubt still remains uncleared that WHY is it so? If we wish to be knowledgeable professionals we must know as to WHY did even the court ordered so?! :/ And once agn, to both of you frnds, Thankyou for helping out! :)

CA Chandra Prakash (9873059766 Increasing knowledge through sharing) (296 Points)
Replied 22 August 2015

Service tax is not an income, protdsvisions are applicable on income sources i.e tds should be deducted on income of assessee. Before notification 1/2014 tds is deducted on amount inclusive of service tax due to legal language of law only in case of 194I rent the language of law is correct, I.e use of word any income and in all other cases the word used is any sum. When the judgement of Rajasthan urban infrastructure came then the word any sum is interpreted by the court correctly in such case and to align with the judgement or correct the language cbdt issue such notification. I hope ur query would be resolved now.

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Naina (student) (151 Points)
Replied 22 August 2015

Yes definitely! Wonderfully explained!! Thankyou so much!! Thanks a lot!

CA Sukriti Jain (Senior, EY) (1184 Points)
Replied 22 August 2015

first you should tell me why do we deduct tds.... it is because that income is taxable in the hands of recepient.

now, in th case of payment of bill+service tax (100+12 Lets assume) to the 'service provider' - he will get 100 for his services. & 100 will be considered his income. the remaining amount of rs.12 received by him will not be retained by him. instead, it will be transferred to govt. so this 12 rs. is not his income. hence ino question of taxing it in income tax act. so why to even talk about TDS on 12 rs.

HENCE, NO TDS ON SERVICE TAX.

I hope you got your answer apeksha

CA Chandra Prakash (9873059766 Increasing knowledge through sharing) (296 Points)
Replied 22 August 2015

I think u know better than me why tds is to be deducted, as i know it prevent assessee from default in payment of tax. As we know that at the end of the year tax amount become heavy and it becomes difficult to discharge the liability of tax and another reason is it enable to Govt. To collect revenue earlier. I dont understand what do u want to ask in the last line.