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TDS on Job Work (Income Tax)

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This query is : Resolved


( Author )
05 May 2010

I have a leather goods factory. I give raw material to our outside job worker & he make goods for me. after that he billed to me for his charges. Pls discribe me that TDS under 194C is applicable in such case if yes what is the limit of exemption. as per my knowledege there is no tds on such job work wef 01.10.09 perhaps. but I am still not sure. Pls help me out.


taxindiaconnect

( Expert )
05 May 2010

In your case TDS is applicable as this comes under the definition of "work" as per section 194C of IT Act. the amendment in the Act is the result of a long drawn controversy on the issue of contract for "Work" or contract for "Sale". Various circulars issued on the topic were prone to interpretations thus the litigation on the subject continued. Now definition of "work' has been clearly included in the Act itself, the things are settling. The rate is 2% and the limit up to 31.03.2010 was Rs 20,000 single payment or Rs 50K for total payment exceeding during the year. From 01.04.2011 the limits have been revised for 30K and 75K respectively.


B.Chackrapani Warrier

( Expert )
05 May 2010

While issuing invoice by the job worker to you, he has to separately mention the value of material supplied by you in the said invoice. If that is being done, income tax has to be deducted under section 194C on the invoice value excluding the value of the said material.
On the other hand ,value of material supplied by you is not separately mentioned by the job worker in his invoice raised against you, Income tax has to be deducted under section 194 C on the whole of the invoice value.


CA. SANAT PYNE

( Expert )
05 May 2010

AS FAR AS I KNOW A SEPERATE BILL IS TO BE RAISED ON SUPPLY OF MATERIAL INSTEAD OF SEPERATELU MENTION IN THE SAME BILL. IF A SINGLE BILL IS RAISED THEN TDS WILL BE DEDUCTED ON THE INVOICE VALUE INCLUDING THE VALUE OF SAID MATERIAL.


CA. BIJENDER KR. BANSAL

( Expert )
05 May 2010

Clarification regarding “work” under section 194C.

There is ongoing litigation as to whether TDS is deductible under section 194C on outsourcing contracts and whether outsourcing constitutes work or not. To bring clarity on this issue, it is proposed to provide that “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’. This will however not apply to a contract which does not entail manufacture or supply of an article or thing (e.g. a construction contract).

It is also proposed to include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, within the definition of ‘work’. It is further proposed to provide that in such a case TDS shall be deducted on the invoice value excluding the value of material purchased from such customer if such value is mentioned separately in the invoice. Where the material component has not been separately mentioned in the invoice, TDS shall be deducted on the whole of the invoice value.

It is further proposed to make the amendments effective from the 1st day of October, 2009. Accordingly, the proposed amendments will apply to credits or payment effected on or after 1st October, 2009.



Ram Avtar Singh

( Expert )
05 May 2010

TDS applicable on jobwork bill under section 194C @2%

if individual or HUF then TDS@1% to be deduct.


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