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Tds rate query

Ravishankar K (Accountant) (461 Points)

04 December 2012

Dear Friends,

We have outsourced training of 1000 candidates to one company who will train students for us in various places of state. We have entered into agreement with them and are paying them an amount per candidate for eg. Rs.500/ candidate.

Now while raising invoice the party has raised invoice for Rs.1000 * 500 = 500000

+ Service Tax @ 12.36% = 61800

Total Invoice Amt. Rs.561800/-

Now my query is how to treat this transaction whether it will come under sec 94C (2%) or sec 94J (10%)

Kindly guide me friends.

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4 Replies

Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 05 December 2012

Explanation (b) to section 194J provides that the term ‘fees for technical services’ shall have the same meaning as in Explanation 2 to section 9(1) (vii). The term ‘fees for technical services’ as defined in Explanation 2 to section 9(i)(vii) means any consideration (including any lump sum consideration) for rendering of any of the following services: (i) Managerial services; (ii)Technical services; (iii)Consultancy services; (iv) Provision of services of technical or other personnel. It is expressly provided that the term ‘fees for technical services’ will not include following types of consideration: (i) Consideration for any construction, assembly, mining or like project, or (ii) Consideration which is chargeable under the head ‘Salaries’. Training services should be part of the technical services,, So TDS should be deducted u/s 194J. Training services are outside the scope of Section 194C.

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Ravishankar K (Accountant) (461 Points)
Replied 05 December 2012

thank you very much for your reply friend,

but like many people have different opinion some say 94C some say 94J, , we have entered into a contract with them and agreed for a fixed price per candidate and we are not the direct benefitiary, like we received the order to train 1000 students and we are further sub letting / sub contracting the job. Hence im planning to deduct under 94C but tomorrow if someone asks that you have outsourced the training work and why not taken 94J i need to justify them. And along with training they are also doing lot of admin work also, so is it fully technical / prof service or contract work.

Also regarding this i am planning to ask the party itself that for such work what rate TDS is being deducted from their payments when they do such work for other parties.

Am expecting some more opinions , reviews.

Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 05 December 2012

Section 194C covers the contracts for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract.

Further, Work includes –

(a) advertising;

(b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting;

(e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer.

However, “work” shall not include manufacturing or supplying a product according to the requirement or specification of a customer by using raw material purchased from a person, other than such customer, as such a contract is a contract for ‘sale’. However, this will not be applicable to a contract which does not entail manufacture or supply of an article or thing (e.g. a construction contract).

As per this section, the expression of deducting tax on works contract /supply of labour contracts. Training services is a type of services imparting knowledge by the efficient experts, which is not a works contract but a professional contract because that service provider is efficient and expert of providing training.

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