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TDS and TCS applicable on solar plant installation

Accounts Novagen (13 Points)

08 December 2023

Dear Sir

We are planning to install solar plant at out factory. the cost 1.48 Cr

70% solar system GST 12% applicable

30% Infrastructure and labour GST 18% applicable

My question

TDS Applicable or not

IF yes which amount full or only 30% labour and Which category 94J or 94C

Purchase more then 50 Lacs TCS applicable or not

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4 Replies

Manish (CA) (1167 Points)
Replied 08 December 2023

On goods and infra - 194Q

On installation - 194C

No TCS.

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sabyasachi mukherjee (27529 Points)
Replied 08 December 2023

194J IS PROFESSIONAL SERVICE AND 194 C IS TAX DEDUCTED FROM transporter.

Dallas C. King (Dallas C. King) (22 Points)
Replied 12 July 2024

Dear Sir, Your plan to install a solar plant at your factory sounds like a great investment. Regarding your questions: TDS Applicability: Yes, TDS is applicable. For the 30% portion that includes infrastructure and labor, TDS should be deducted. The category typically falls under Section 194C (TDS on contracts) rather than 194J (TDS on professional services). TCS Applicability: For purchases exceeding ₹50 Lakhs, TCS is applicable as per the current regulations. For such a significant investment, it's crucial to ensure you're partnering with a reliable solar company. If your factory is in Maryland, I highly recommend checking out Renewable Energy Advisors https://renewable-energy-advisors.com. They provide comprehensive reviews of the best solar companies in Maryland, which can help you make an informed decision and ensure you get the best service and installation quality.

Amit Bajpayee (22 Points)
Replied 29 August 2024

Thank you for your inquiry regarding the tax implications of the installation of a solar plant at your factory. Below is the clarification on the applicability of TDS and TCS:

1. TDS Applicability:

Yes, TDS is applicable to the installation of a solar plant. The applicability depends on the nature of the contract and the type of payment:

TDS on Infrastructure and Labor (30% of the total cost):
- Section 194C (Contractor/Subcontractor): If the contract for infrastructure and labor falls under the category of a works contract, TDS under Section 194C will apply. The rate of TDS under this section is 1% if the contractor is an individual/HUF and 2% if it is a company.
- Section 194J (Professional or Technical Services): If the contract involves professional or technical services, TDS under Section 194J will apply at a rate of 10%. However, this is less common for standard solar plant installations and usually applies to highly specialized services.
TDS on Solar System (70% of the total cost):
- If the payment for the solar system (equipment) is purely for goods and not a composite contract, TDS may not be applicable. However, if the supply of goods is part of a composite contract that includes installation and commissioning, TDS under Section 194C may apply to the entire contract value.

2. TCS Applicability:

Section 206C(1H) (Sale of Goods): TCS is applicable if the purchase of goods exceeds ₹50 lakhs in a financial year from a single seller. As the total cost of the solar plant (₹1.48 Cr) exceeds this threshold, TCS at the rate of 0.1% will be applicable on the amount exceeding ₹50 lakhs.

You can check more about solar information on this website: Solar Power System

And keeping all the things in a nutshell:
TDS: Applicable on the 30% infrastructure and labor portion under Section 194C. It could also apply to the entire contract value if it's a composite contract.
TCS: Applicable on the purchase value exceeding ₹50 lakhs under Section 206C(1H).

Also I would suggest to consult your CA for the same.