Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

TDS on which amount

Naveen Chand Khulve (CA) (1521 Points)

14 December 2009

We have received an invoice of Rs 22860 as per detail below:

Software and license charges: Rs 20000

Service Tax on Rs 20000: Rs 2060

Vat @ 4% on Rs 20000 Rs 800

Please confirm that on which amount TDS should be deducted.

Thanx in adva

Reply
Follow
Share

16 Replies

CA.kaya (Chartered accountant) (3990 Points)
Replied 14 December 2009

hey how both service tax and vat can come in one bill? i mean one is on goods and another on service

Upgrade to CAclubindia Pro. Subscribe Now!

Shiva Kumar (CA Final) (208 Points)
Replied 14 December 2009

Originally posted by :Kaya
"	hey how both service tax and vat can come in one bill? i mean one is on goods and another on service	"

Strictly speaking both Service Tax and VAT will not arise. However, there are fringe (on the edge transaction) which are not clearly identifiable either as goods or service. So, the seller to be on the safer side collects Both VAT and Service. There are Supreme Courts and various other case laws regarding the same. However, still this is the sad position of LAW.

Coming to the Ques

We should also be on the safer side and deduct tax on the entire Invoice value (even includind the VAT amount).

If the opposite person objects to it ask him why he has collected both VAT and Service tax. Why take a risk of disallowance?. Anyways, he can claim the tax credit. Nobody loses.

This is the position as of today.

Shiva

(Guest)

thanks

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 15 December 2009

Even in case such a thing happens that there is VAT as well as service tax, tax has to be deducted on the total invoice value. In your case, it is Rs.22,860/-. The Board (i.e. CBDT) has also clarified on it that tax has to be deducted on payment amount and not on the amount which is considered income by the payee. So tax has to be deducted on The gross value of invoice.

Airody Manjunatha Alse (ca) (100 Points)
Replied 15 December 2009

In the question Service tax and Vat included in the same bill. How it is possible?

One is for Service and other one is for Sale of Goods.

Still, please note tds should made always on excluding the tax amount.

Upgrade to CAclubindia Pro. Subscribe Now!

CA Parag Jani (BCom CA DISA Forensic Auditor) (288 Points)
Replied 15 December 2009

Can anyone plz explain what will be the case when the payer avails INPUT TAX CREDIT of service tax or VAT under state act? In such a case the payer will, actually, paying a lesser amount by availing the input credit. So what should be done in such a case?

BIJAY KUMAR RUNGTA (CA FINAL STUDENT) (85 Points)
Replied 15 December 2009

yes,tds should be deducted on whole amount means 22860.only in case of rent we dont consider the service tax component in the calculation of tds.

Arvind Sharma (ACA) (1432 Points)
Replied 15 December 2009

TDS shall be computed and deducted on amount payable or credited... it is irrelevent whether it include S Tax or not...

It has been clarified in the case of Associated Limited Vs CIT (SC) (1993), that its not the duty of payer to estimate income portion from gross amount payable...

The payer is required to simply deduct TDS on amount payable (or credited to PL/IE Ac) if exceed basic limit..

Further, where it is given that VAT has been charged then there will no TDS., as there is no liability of deducting TDS on payment made in respect of purchasing goods.., and VAT is charged on Goods, not on services..

I am not sure about that fact., but as far as I know, there is no such payment which is made for buying good and such goods are charged to VAT...

Satish shastri (CA final Student) (91 Points)
Replied 15 December 2009

The TDS will be deducted on the gross amount i.e 22,860.

Satish shastri (CA final Student) (91 Points)
Replied 15 December 2009

the VAT will be on SOftware purchase and the ST will be on development or installation of software, so there is no question to say that hw both St nd VAT is in same invoice...

Upgrade to CAclubindia Pro. Subscribe Now!

CA Bhuvnesh Kumar (Chartered Accountant) (69 Points)
Replied 15 December 2009

This is a kind of Payment of Sale or Purchase which never comes under the purview of TDS. So, No TDS is deductible neither on Rs. 20000 nor on Rs. 22860

CA Bhuvnesh Kumar (Chartered Accountant) (69 Points)
Replied 15 December 2009

This is a kind of Payment of Sale or Purchase which never comes under the purview of TDS. So, No TDS is deductible neither on Rs. 20000 nor on Rs. 22860

manoj bansal (Article Assistant) (30 Points)
Replied 15 December 2009

tds will be deduct only Rs. 20000

Dilip (Working) (408 Points)
Replied 15 December 2009

Satis is correct, when they provide software or license on cd that is one kind of service and profession and not just a buying and selling. The same service is covered under Informations Technology services under section 65(105) in Finance Act, 194. Due to non availiblity of service amt and CD amt seperately it was charged on whole amount and also VAT is charged on it, which is correct.