I want to know what is the criteria for deducting a TDS. If the Service Tax is included in the bill is it necessary to deducted the TDS. Pls. reply.
Anupam Bajaj
(Student)
(111 Points)
Replied 04 January 2012
CA Prabhat Gupta
(Manager (Indirect Taxes))
(821 Points)
Replied 04 January 2012
Mr. Bhavesh,
In my opinion, Service Tax is not considered as a part of income as, being an indirect tax, it has to be deposited to government. Whether we have to deduct tax on Service Tax portion or not, will depend upon the text of the section under which you are deducting tax. For example:
"194C. (1) Any person responsible for paying any sum to any resident ..........."
"194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission.........."
"194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by way of rent........"
"194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of........"
If you could notice the change in text in various sections on TDS, you will find that wherever it was intended to deduct tax on gross amount inclusive of Service Tax the words "any sum" has been used and where tax has to be deducted only on income the words "any income" has been used. So, while deducting Tax, the text given in the relevant section should be kept in mind.
CA Prabhat Gupta
(Manager (Indirect Taxes))
(821 Points)
Replied 04 January 2012
Though it is still a debatable issue. By reading the whole text of the relevant sections, different interpretations could be made. Moreover, CBDT has issued a clarification on the view posted above vide Circular F. NO. 275/73/2007IT(B), dated 30-6-2008. The text of the same has been produced below:
Deduction of Tax at Source (TDS) on Service Tax
CIRCULAR F. NO. 275/73/2007IT(B),
DATED 30-6-2008
Kindly refer to your letter No. Dir. Tax/761, dated 5-5-2008 on the subject mentioned above. Your request has been considered by the Board. The payments made under Section 194-I differ significantly from payment made under Section 194-J in the way that in the case of 194-I TDS has to be deducted on any income paid as rent. However, in the case of Section 194-J has to be deducted on any sum paid as professional and technical fees. The board had decided to exclude TDS on service tax component on rents payment because it was construed that service tax payment cannot be regarded as income of the landlord. Since Section 194-J covers any sum paid, therefore the board has decided not to extend the scope of Circular No. 4/2008, dated 28-4-2008 to such payment under Section 194-J.
I hope this will clraify the the issue once and for all
Regards
T.Vijayaragavan
The basic objective of TDS provision is to deduct tax on income at source. This objective seems to have been defeated by such provisions.
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