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TDS on which amount

Naina (CA Student) (477 Points)

13 July 2009

Please tell me whether TDS will be deducted on the whole bill amount including service tax/VAT or on the amount excluding service tax/VAT.

Eg: Fabrication amount - Rs. 50000

VAT 4% - 2000

Now will TDS is to be deducted on Rs. 50000 or on Rs. 52000?

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15 Replies

(Guest)

You should to be deduct TDS on G.Amount i.e., Rs.52000.

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CA Nitin Wadhwani (Chartered Accountant) (4469 Points)
Replied 13 July 2009

In case VAT is levied, Tax would not be deducted since it is a case of sale of goods and not contract for work and labour.

CA.kaya (Chartered accountant) (3990 Points)
Replied 13 July 2009

By Circular No. 4/2008, dated 28-4-2008, CBDT clarified that Service tax paid by the tenant doesn’t partake the nature of income of the landlord, thus TDS has not to be deducted on Service tax. Though this clarification was in respect of section 194I, but it was the considered opinion of professionals and tax consultants that this view is also applicable in respect of other TDS provisions.

Naina (CA Student) (477 Points)
Replied 13 July 2009

Please made me clear. There are different opinions on this as Mr. Deepak and Miss Kaya have said contradicting views.

CA Vinay Saraf (CA) (148 Points)
Replied 13 July 2009

IN CASE OF 194C THE TAX IS TO BE DEDUCTED AT THE GROSS AMT AS COMPARED TO SEC 194I WHICH SPECIFICALLY PROVIDES FOR INCOME SO WE HAQVE TO DEDUCT THE TAX ON GROSS BILLING OF RS 52000

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(Guest)

Hi Naina,

Tax is made only for the service providers and not on the purchase of material, hence, if contractor invoice shows VAT thn you don't need to be deduct any tax bcz its simple trading (Purchase and sale) otherwise if invoice show service tax thn you should to be deduct TDS as on the G.Amt i.e., 52000/- but it should not be rent service, if you got the invoice in favor of rent service you should to deduct TDS as excluded of service tax i.e., 50,000/-.

I think your doubt is clear now.

Gurmukh Singh (Manager Accounts) (96 Points)
Replied 14 July 2009

Hi Naina, According to Section 194C & I , if any Contractor made you invoice like given in your problem with VAT then the TDS is not to be deducted, but in case of Service tax it would be deducted on Gross amount (on rs.52000), so i think it should be clear to you now

RAJU (LEARNER) (1089 Points)
Replied 14 July 2009

Deduct TDS on full value, that is 52,000. The circular is applicable only for 194I

Mukesh S Boudai (Finance & Accounts officer) (32 Points)
Replied 14 July 2009

Naina,

Please go through the following:

1) VAT is applicable on sale of goods and TDS is deducted on specified services.

2) If it would be 'Fabric', VAT would be applicable.

3) Fabrication is service . Hence question of charging VAT do not arise.

4) Except in case of Sec 194I i.e. payment of rent, take Service Tax portion in account while deducting TDS.

5) Example: Fabrication Charge 10,000, Service Tax - 1,300. Total Bill of Rs.11,300. Deduct TDS on 11,300 and not on just 10,000.

Sagar (Student) (142 Points)
Replied 14 July 2009

If Vat Is charged on the bill then how TDS is deducted on it while TDS is applicable on specified services.. Except the serviec of RENT service tax amount should be included while deducting TDS....