CA Saurabh Shukla
(Accounts Executive)
(223 Points)
Replied 11 March 2010
Dear Hena,
there is no logic in Deducting tax on service tax part .
But, when u file return Service tax will not be included in your income. So, u get refund of tax on service tax.
Correct me, if i m wrong...........
CA Anshu Agarwal
(B€ @LW@¥$ ]-[@Pp¥)
(1832 Points)
Replied 11 March 2010
As service tax is not an income of the payer (service provider), hence tax should not be deducted from payment made for service tax.
If bill raised by the service provider does not show the service tax component separately, tax should be deducted on whole amount inclusive of service tax.
however, in case tax has been deducted on whole amount, the whole amount of tds can be adjusted against the income tax payable.
Rajat Singhal CA,CS,CFA
(Senior Manager (F&A))
(254 Points)
Replied 12 March 2010
hello heena,
There is no logic for deducting the TDS on service tax component.
In its circular, board has clarified that tax deduction at source under section 194-I of the Income Tax Act, would be required to be made on the amount of rent paid/payable without including the service tax. (Cicular No. 4 dated 28-04-2008). Reason given by CBDT in this circular that service provider only acts as a collection agent for the government.
After ths clarification, every body was of the view that the principal enunciated by ths circular is applicable to all the payments made by the assessee and accordingly no TDS is deductible from on the part of service tax whether it is professional's bill or contractor's bill. But, to settle the issue, CBDT has issued another clarificatin vide circular F no. 275/73/2007IT(B) dated 30-06-2008 can not be extended to the payment made under section 194-J (Fees for professional and technical services). Therefore, TDS is to be deducted on the gross amount inclusive of service tax where the payment is being made u/s 194-J.
From the reading of both the clarifications, the reasons for two stands in two situtations can be discussed as under :-
CBDT has given clarification on the matter by issuing circular stating that u/s 194-I TDS is deductible only on the rental income & not on service tax (circular no. 4 dated 28-04-2008) and u/s 194-J TDS is deductible on gross amount i.e. inclusive of service tax. (Dated 30-06-2008). The reason given by CBDT are that provisions of section 194-I requiers deduction of tax at sources on "any income by way of rent", whereas provisions of section 194-J requires deduction of tax at sources on "any sum payable" by way of professional fee, for technical services, royalty & non compete fee.
CBDT states that as 194-I requires deduction on income & service tax does not form part of income, thus TDS is not deductible on TDS. While in case of 194-J CBDT lays stress on "any sum payable" & forgets the part "by way of professional fee, fee for technical services, royalty & non compete fee." Now, Service tax does not form part of professional fee, it is over and above the professional fee which the service provider has to collect from the service recipient & pay to government. Thus it is not part of "any sum payable by way of professional fee".
From the above discussion I think that TDS should not be deducted on service tax component.
The following reasons for this are as under :
1. The money collected (by way of service tax) is instantly diverted by over-riding title. 2. If we read basic charging section of TDS (Section 190), it requires the deduction of tax on income of the recipient. (service tax is not the income as accepted by the CBDT).
3. If CBDT accept in their circular that service provider only acts as a collection agency. Then why not for professional service provider is a collecting agency of government for the purposes of section 194-J, they only stress on the wordings of section 194-J, this is not a true law and has to be amended by finance ministry department.
Regards
Rajat
CA. ESHAN GOYAL
(ca)
(63 Points)
Replied 15 March 2010
TDS IS SHOULD BE DEDUCTED EXCLUSIVE OF SERVICE TAX IN CASE OF SEC 194-I...........
AND TDS SHOULD BE DEDUCTED INCLUSIVE OF SERIVICE TAX IN CASE OF ANY OHTER SECTION............
SATYA PRASAD
(CA-FINAL)
(32 Points)
Replied 15 March 2010
I agree with Raj Singhal''s comment on the query. We are remitting the Service Tax collected on Professional Charges to Government and we are also remtting the Service Tax collected on Rent to Government. What is difference between these transctions?. In both the cases Service Tax is not a Income to the recipient.
Monika Bachhawat
(Chartered Accountant)
(211 Points)
Replied 15 March 2010
If Payer claims credit of the Service Tax, then no need to deduct TDS on service Tax(as only Expense amount will be expense for him & not ser tax amount) but if payer is not a service provider or is not liable to pay service tax, then the full amount ( Expense + Service Tax) will be expense for him & hence he will be liable to deduct TDS on it.
CAclubindia
