Rachit (Analyst) (913 Points)
16 February 2010A contractors raises bill which includes the following elements:
Bill Amount xxx
VAT @ 2% xxx
Service Tax 10.30% xx
TOTAL AMOUNT XXXXXX
QUERY : Whether TDS u/s 194C is deductible on the total bill amount i.e. incl. VAT element (Works contract tax) or excluding VAT amount?
Rachit
(Analyst)
(913 Points)
Replied 16 February 2010
Dear Harmeet
Well that is the safest remedy. But it would amount to deducting TDS on VAT i.e. tax on tax.
Just as there is a clarification by way of circular that in the case of TDS on Rent (sec.194I) TDS is not to be deducted on service tax element, similary is there any case law / circular in the case of TDS on VAT?
Pankaj Arora
(Learner)
(3134 Points)
Replied 16 February 2010
In this condition TDS will deduct on whole amount including vat amount
Amir
(Learner)
(4016 Points)
Replied 16 February 2010
Dear Rachit,
TDS is not a tax in itself it is just a maaner of collecting Income Tax, therefore by deducting TDS on amount inclusive of VAT there is no such case of "Double Taxation" or " Tax on Tax" or "Cascading Effect on Tax"
Because Income Tax is Tax on Income whereas VAT is tax on Sales....
I hope u r getting what I mean.......
Rachit
(Analyst)
(913 Points)
Replied 16 February 2010
Dear Amir,
What I mean by the words tax on tax is not the cascading effect of tax. Let me illustrate my logic on this issue:
If the contractor has levied Rs.100 as vat (works contract tax) in his invoice, so in his monthly vat return he has to pay this 100/= to the govt vide his vat return immediately in the subsequent month. But what he actually recovers from me as VAT is only 98/= for the balance Rs.2/= he gets a TDS certificate the benefit of which he will get in in Income Tax return.
Further,
VAT is state government's revenue while
income tax is a central government's revenue. So to that extent the state goverment looses its share of revenue.
In big work contracts this Rs.2/= (TDS on VAT ) would run in crores.
Hence my query.
Ameet
(L)
(1678 Points)
Replied 16 February 2010
TDS is required to be deducted on whole amount. TDS on Rent is seperate thing since seperate circular is provided. It is to be noted that TDS is tax on income while VAT is tax on Sale.
Amir
(Learner)
(4016 Points)
Replied 16 February 2010
Dear Rachit,
That's exactly where I was trying to point, good example dude......
Now, Even when TDS is deducted, State Govt is not loosing it's share of VAT (wct) 0- entire 100 will be deposited becos TDS is not a tax in itself...
The TDS i m talking about is under Income Tax........I know there are provisions of deduction of tax at sourse under VAT also...Even in that case tax has to be deposited with the Local govt..
CA karan Gulyani
(Accounts Executive)
(32 Points)
Replied 16 February 2010
tds will be deducted on the whole amount
Hardeep
(Auditor/Accountant)
(49 Points)
Replied 06 August 2011
We paid amt of Rs. 1,00,000 for Accident bus' repair no TDS was deducted as the material was not provided by us. but the St auditor is asking other way. is he corect. how can i prove my point?
Aswadh Kota Ragala
(CA)
(85 Points)
Replied 05 January 2012
Dear Rachit,
I will agree with Amir, TDS has to be decucted on whole amount of bill (inclusing VAT)
CAclubindia
