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Tds on goods plus services

trishanku (CA final student Article) (44 Points)

18 August 2012

Plz help me in this matter about TDS

In case of jewellary business, the box ( to be given to customers ) are purchased. Further the name of the jewellary shop also written on box.

Now, when the box are purchased in way as the seller is to provide the box ( Goods ) and also service ( job work / service for writing name on box ). The seller issues only one bill for the box ( including worj done for writing name )

The question is whether thisjewellary shop is required to deduct TDS u/s 194 C or any section w.r.t. TDS ?

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12 Replies

(Guest)

This payment is in the nature of contract. TDS will be deducted u/s 194C @ 1% if deductee is individual / HUF, else @ 2%, if single payment exceeds 30000/- or exceed aggregate 75000/- during FY on entire invoice amount.

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S Gupta (Finance Manager) (92 Points)
Replied 18 August 2012

Hi Trishanku,

If the supplier supplied the material along with logo and charges the local sales tax, there is no TDS on the maerial supplied along with logo and there is no contract work involved in it.

If u provided the material to the contractor and the contractor has printed the logo on the material, in this case 194C will attarct and u can deduct tds on the contract amount.

for the above question, there are number of case laws, u can download the same from any website relating to IT

Akash Jain (CA Final Student) (261 Points)
Replied 18 August 2012

Dear Gupta Sir,

              Can you  please mention the Case Law in detail with its Pratical Application

              Thanking in advance

S Gupta (Finance Manager) (92 Points)
Replied 18 August 2012

Hi Trishanku,

Circular Number 681 of the Income Tax - Where, however, the contractor undertakes to supply any article or thing fabricated according to the specifications given by Government or any other specified person and the property in such article or thing passes to the Government or such person only after such article or thing is delivered, the contract will be a contract for sale and as such outside the purview of this section.

U can down load the circular from any website relating to income tax

Further there are different opinions on the same issue. U can take advise from your statutory auditors, becaz at the time of scrutiny they will help u in this regard.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 18 August 2012

Please ensure 1st that the goods are SOLD( inclusive of printing), after charging the requisite VAT/CSTin your invoice, if the conditions confirm then the jewellary shop has to consider the same as Packing box purchase, and purchase a/c is not liable for TDS.

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trishanku (CA final student Article) (44 Points)
Replied 18 August 2012

I forgot to mention that the shop avails input VAT credit on the box ( Packing material ) purchased.

On purchase it records this as box and packing stock

and at the year end adjusting entry is passed by debiting box exp and crediting box stock

Now, should TDS be deducted ?????

Plz guide me.

Thank you all.

(Guest)

TDS is not deducted in this case since invoice which is given to you by your seller has VAT charged in it. Meaning thereby it is your puchase purely. TDS is deducted on expenses not on purchases.

If invoice might show VAT and Service tax (ST), then TDS liablility will come since ST implies rendering of some service by seller in addition to goods/ material.

Dheeraj (Learner) (1100 Points)
Replied 18 August 2012

I read this case and having some cofusion
please clarify...

The boxes are not core product for a jewellary business, they are not doing the business of purchasing and selling "BOXES" then how can prop./business can avail VAT credit?

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trishanku (CA final student Article) (44 Points)
Replied 18 August 2012

Dheeraj,

VAT credit is available in case of packing materials for sure

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ARUN BOSE (ACCOUNTANT) (29 Points)
Replied 20 August 2012

u're asking whether TDS is applicable on service(writting the shop name in boxes). is the supplier is providied the seperate invoice for the service.

if not, then TDS is not attract on purchases.

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CA. NARAYAN BHANDARI (Manager-Accounts) (57 Points)
Replied 22 August 2012

Hi, As per Section 194C, works contract means a contract to supply labour along with goods. Since in your case both are involved, there is a necessity to follow the provisions under section 194C. In case of work contract being manufacturing or supplying product according to the specification of customer (by using the material purchased from such customer), TDS shall be deducted on the invoice excluding the value of material purchased from such customer if such value is mentioned separately in the invoice.

(Guest)

Originally posted by : CA. NARAYAN BHANDARI
	TDS shall be deducted on the invoice excluding the value of material purchased from such customer if such value is mentioned separately in the invoice.