Please Help: TDS
Posted Date : 26-Nov-2011 , 12:29:15 pm | Posted By: Vikas Kundu
Category :
Income Tax | Answers :
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Comments :
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Dear colleges, Sec 194C gives the provision for deduction of TDS in relation to contractors.In a case where contractor is a manufacturer under central excise tariff Act and charging excise duty on billed amount separately in bill itself. Then in that case, TDS will be deducted on what amount either including excise duty or excluding duty? |
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Answers:
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 Answer by: Ashish Karundia |
| Dear Vikas,
Explanation IV(e)of Section 194C provides that work shall include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer,but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.
In other words, work as defined under 194C specifically excludes the cases where the contractor is manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. Further, it may also be noted that the instant transaction amounts to sale of goods from contractor and therefore no TDS can be deducted.
Thus, in the instant case, TDS u/s 194C itself would not be applicable.
Hope this suffice the above.
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| Answer by: Vikas Kundu |
| Dear Ashish, in the case of which you have replied contractor (seller) purchasing material from a person other than assessee. But if contractor purchasing the material from assessee and after completing work selling back to assessee.
Now he is raising bill in such a way:
material 400000
value addition 100000
excise duty 50000 (on whole amount)
total 550000
sales tax 25000 (on total amount)
grand total 575000
now what will be amount of tds @ 1%. Give a look to the comment also.
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| Answer by: Ashish Karundia |
| Dear Vikas,
Section 194C (3) provides that where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv ) of the Explanation, TAX SHALL BE DEDUCTED AT SOURCE(i )on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or(ii ) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice.
In the instant case, the value of material is shown separately, therefore, here TDS will be deducted only on the value addition portion (i.e. 10,000 +applicable Excise Duty and Sales Tax).
Further, the replies are given on the basis of the provisions of the ACT and not on the basis of comments posted by anyone.
Hope the above suffice.
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| Answer by: CA VIPIN GARG |
| Dear Vikas, Please remember that TDS is to be deducted on the service provided by the contractor but if he is charging the excise duty or wct or service tax then we have to deduct the TDS on the amount inclusive of all taxes.
If the contractor is also using material but not issuing the seperate bill and charging the EXCISE DUTY and SERVICE TAX NOT SALES TAX on the composite amount then we have to deduct the TDS on whole of the amount inclusive of excise duty and service tax.
As per the example given by you, it has been rightly stated by Ashish that this will amount to sale and not service and therefore there is no question of deduction of TDS.
By your example what i understood that i think you want to ask in regard of composite service contract where some or most of the material is been provided by the contractee, then in that case there is no bill has been raised by the contractee also because it amounts to sale to the contractor and then the contractee has to pay the sales tax also. In that case what happens in reality is the contractor is charging the bill for his service only although the contractor is required to deduct the service tax on the whole amount (inclusive of material issued by the contractee) but the TDS will going to be deducted on the billed amount only (which is exclusive of material value).
Hopefully you got the answer you were looking for, Have a nice day Vikas Ji...........
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| Comments |
| Posted By : Vikas Kundu |
28-Nov-2011, 07:09:17 |
| Thanks Ashish and vipin |
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| Posted By : Sujeet Kumar Jha |
26-Nov-2011, 03:06:49 |
| A far as provision of 194c is concern a word is written income credited that means tds will,be deducted excluding on the amount of excise duty. |
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