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TDS on Service Tax

Raginee (28 Points)

10 May 2007

Whether TDS is deductible on Service tax charged in Bill on consolidated Billing for Design Engineering, Supply of Pre structured Building MAterial, Manufacturing, Erection of such Building Material. Say Billed amount is Rs. 1.25 Crores plus service tax @ 10.2% thereon Rs. 12.75 lacs which comes to a total of Rs. 13775000/- . What would be the rate of TDS and on what amount shall it be deducted?

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10 Replies

Amit Aggarwal (24 Points)
Replied 10 May 2007

TDS should be deducted u/s 194J on the gross amount of the bill (including the S.Tax)

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Anand Chauhan (183 Points)
Replied 10 May 2007

Whatever be the section 194C or 194J, even it, alongwith Cir 715 Q. 30 it saying that TDS should be made from gross bill and reimbursement can not be deducted from the gross bill, TDS is NOT to be deducted from the amount of Service Tax.

Consider Section 196 of the IT Act.

196. Notwithstanding anything contained in the foregoing provisions of this Chapter, no deduction of tax shall be made by any person from any sums payable to

(i) the Government, or

(ii) the Reserve Bank of India, or

(iii) a corporation established by or under a Central Act which is, under any law for the time being in force, exempt from income-tax on its income, or

(iv) a Mutual Fund specified under clause (23D) of section 10,

where such sum is payable to it by way of interest or dividend in respect of any securities or shares owned by it or in which it has full beneficial interest, or any other income accruing or arising to it.]

Everybody knows meaning of words "NOTWITHSTANDING ANYTHING CONTAINED IN THE CHAPTER" and "ANY SUM PAYABLE TO GOVERNMENT"

Service Tax is not "CHRGED" by the professional/contracter, but "COLLECTED" on behalf of government and deposited into the government.

NO TAX ON TAX.

Regards.

Vk Duggal (320 Points)
Replied 10 May 2007

Service tax is paid to party and not to government, hence it will not be covered by section 196.

Section 196 is with reference to any payment to government etc. as listed by Mr. Chauhan.

Here payment is made to the party. If this logic to be applied it will mean that while making making payment for manpower supply etc. payment of statutory dues should be excluded for TDS.

Anand Chauhan (183 Points)
Replied 10 May 2007

I think statutory dues for menpower supply is not govt. payment it is for benefit of employees and ultimately will be paid to employees. Whereas, ST is payment to government COLLECTED, and not charged, and deposited to govt. It chargeed and collected both are not comparable.

Further, those statutory dues are part of income charged. whereas service tax is tax collected and not charged.

Regards.

Ankit Bhatia (163 Points)
Replied 10 May 2007

TDS is to be deducted on the whole amount including serv tax,ac circular 715 refers to any sum paid. further even in case we consider Sec 196,we are not paying it directly to govt.Further if we look at the intention of TDS provisions , then we will find that it is levied to ensure proper tax collection.
The purpose of exemption in case of direct payments to govt is that there is no fear of evasion.
In case of payment to any other person(even though serv tax will go to the govt)there is fear of evasion and tracing the relevant tax payer.
Hence harmonious construction will tell us to ignore (or properly interpret) Sec 196 and deduct TDS con serv tax.

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Amit (61 Points)
Replied 10 May 2007

Paresh Bhagwat (46 Points)
Replied 10 May 2007

TDS should be deducted u/s 194C or 194J will be on the gross amount of the bill, including the S.Tax charged. (Ref. Circular)

ashoka r d (senior audit assistant) (82 Points)
Replied 03 February 2011

my opinion on the first part that whether the tds has to be made on service tax or not. certainly you should not make tds on servcie tax. because the tds has to be make on the income or revenue to the payee and the service tax is not a revenue and here the payor just collect the service not on behalf of the department