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Querry about service tax

Sumanta Das Gupta (Accountant) (310 Points)

11 January 2012

Respected Chartered Accountants, Other Professionals and Students,

Can you please help me with a practical problem in my worklife with Service Tax ?

A sub - contractor (U/s. 194C) has raised a bill to my client company like this :

Net Amout : Rs. 371343.43

Add : Service Tax @ 4.12% Rs. 15299.35

Total Amount Rs. 386642.78

Less : Income Tax @ 1% Rs. 3866.42

Net Payment Rs. 382776.36

Question : Will there be TDS on Service Tax as he has charged in his bill ? Please help.

Thanking you and with best regards.

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7 Replies

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 11 January 2012

Yes, there will be TDS on service tax component under section 194C as the section uses the word " any sum..."

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Keval Ponkiya (CA CS MBA(Fin.) M.Com. L.L.B.) (223 Points)
Replied 11 January 2012

Yes !!! Sumanta,

its a correct system of calculation !!!

TDS is on amount inclusive of Service Tax !!!

So its coorect !!!

chandra sekar (Manager-Accounts) (387 Points)
Replied 13 January 2012

yes the concept is the TDS has to be calculated on gross amount of bill ,irrespective of internal components.

Sumanta Das Gupta (Accountant) (310 Points)
Replied 13 January 2012

I thank all of you Sirs for the clarification.

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 14 January 2012

One should refer to the clear text used in the relevant Act to decide whether to include Service tax in the gross amount for the purpose of deducting service tax. Service Tax does not form a part of the income of the receiver as it is to be deposited with the government.

If we read the text given u/s 194C of Income Tax Act, it says that,"(1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) ............."

While u/s 194-I (TDS on rent) says that," Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by way of rent, shall.............."

The words "any sum" as used in section 194C will include any sum whether it is by way of income or any other sum (even Service Tax), while in case of section 194-I the words used are "any income" and hence service tax (not being income) is to be excluded for the purpose of deducting TDS.

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sadashiv Rupchand Gaikwad (Proprietor) (521 Points)
Replied 22 January 2012

TDS is inclusive except Service tax on Rent on promises

Prabha.G (Partner) (25 Points)
Replied 29 January 2012

Sir,

Is it mandatory that the service receipient should pay the service tax to the service provider? Whish section in the act says that the service receipient has to pay the service tax portion along with the bill amount? Please clarify.