LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Tds deduction

JOYS JOY (Staff) (44 Points)

29 November 2016

Should TDS be deducted on inclusive of Service tax or excusive of service tax?

Reply
Follow
Share

6 Replies

ANKUR TAH (Teacher Consultant and CA finalist.) (543 Points)
Replied 29 November 2016

Not at all. TDS should deduct on gross value.
Ex: Contract gross value 100000.00 S Tax 15% ie. 15000.00.
Now TDS should deduct on 100000.00, not 115000.00.

2 Like

ANKUR TAH (Teacher Consultant and CA finalist.) (543 Points)
Replied 29 November 2016

ie. exclusive of Service TAX.

2 Like

JOYS JOY (Staff) (44 Points)
Replied 29 November 2016

Thank you very much Ankur Tah Sir

Mukesh Kumar (Accounts Manager) (1466 Points)
Replied 29 November 2016

Good Explain Ankur Sir, But I think you should also say some state like under: 1. If service tax charge and show separately in invoice than you need not deduct tds on service tax value, but if service tax do not show separately in invoice than you should deduct tds on gross value of invoice.

1 Like

CA VIRAL SANGHVI (Finance head) (681 Points)
Replied 29 November 2016

Hi, TDS should be deducted on basic value exclusive of tax.

1 Like

CA Pallav Singhania (❤ Work Hard Party Harder ❤) (32322 Points)
Replied 29 November 2016

Let’s take a look at a little longer answer to understand how TDS is to be deducted on a bill when service tax is to be paid. Let’s suppose you employed someone’s services and you have to make a payment of Rs 50,000 for the same. Since the payment is above the threshold limit of Rs 30,000 per bill, TDS needs to be deducted on it. But the service provider has charged 14% service tax and 0.5% Swachh Bharat Cess, so the billed amount has come to Rs 57,250.

In such a case, the bill would be broken down as:

Service Fee 50,000
Service Tax 7,000

Swachh Bharat Cess 250

Total 57,250

Now, do you deduct TDS on Rs
50,000 or Rs 57,250 before making the payment?

TDS would be applicable only on Rs 50,000. That is, only on the actual income of the service provider. The service tax is tax that the provider will pay to the government. Hence, it is not the provider’s income. And TDS is tax that is deducted at source on income.

Therefore, TDS at the applicable rates would have to be deducted on the basic amount exclusive of the service tax only.

1 Like