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TDS on Taxes

Vinod Nayak (Regional Manager - Finance) (69 Points)

09 March 2010

While deduction of TDS from Vendor Bills, should Taxes like Service Tax, VAT etc be included or excluded.

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4 Replies

Vivek Angrish (Manager Finance & Accounts) (232 Points)
Replied 09 March 2010

VAT/CST are to be excluded, Service Tax is to be included while deducting TDS

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Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 09 March 2010

The word used in provision for tax at source is "Any sum" which means any sum.

The Central Board Of Direct Taxes issued circular 715 dt 8/8/1995 which contained question number 30 which answer the aforesaid question.

* Question 30 : Whether the deduction of tax at source under sections 194C and 194J has to be made out of the gross amount of the bill including reimbursements or excluding reimbursement for actual expenses ?
* Answer : Sections 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source.

so its clear that tax should be deducted on full amount of payment

regards,

ratan

M.D.Ram (CA Student) (123 Points)
Replied 09 March 2010

Yes you need to deduct TDS on service tax.

Please find below the clarification:

The tax is required to be deducted at source on the gross amount of bill which is inclusive of service tax as per the clarification issued by the Department.
CBDT in circular no. 715 has clarified that Section 194 C and 194 J refer to "any sum paid" and obviously reimbursement cannot be deducted out of bill amount for the purpose of TDS.
Therefore, considering the above circular and the amount to be debited in books as expenditure, the tax has to be deducted on the entire amount of bill inclusive of service tax.

There are still debates on the above opinion, as the TDS is not deductible on service tax portion on 'RENT' and the same applies for all other cases also.

But department is of the opinion that the TDS on Service tax is applicable in all cases except 'RENT'.

FYI: This issue has been discussed please check the forum for the additional information.

Hope the same clarifies