No tds on service tax

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This query is : Resolved

Sabareesh (Querist)

19 January 2014 Dear all,
Is this true that TDS ahould not be deducted on service tax amount i.e TDS to be deducted only on the total amount less service tax as we do in TDS for rent.

If so, please attach the circular or notification

Nikhil Kaushik

Nikhil Kaushik (Expert)

19 January 2014 what CBDT has said is that if the service tax is charged separately, then No TDS is to be deducted while paying for service tax to the service provider.

What it also means is that if the service tax is included the bill then TDS shall be applicable

please refer https://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=19531

Sabareesh

Sabareesh (Querist)

27 January 2014 Sir,
Is it applicable only to 194 J or to all the TDS sections?

Nikhil Kaushik

Nikhil Kaushik (Expert)

27 January 2014 all the sections other than 195

Message likes : 1 times

Sabareesh

Sabareesh (Querist)

27 January 2014 Is there any relation with the agreement between the parties?

or

Whatever may be the agreement constitutes of, No tds on service tax if shown seperately?

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

03 August 2024 Yes, it is correct that TDS should not be deducted on the Service Tax amount. TDS is calculated on the amount excluding the Service Tax. This principle is applicable across various types of payments subject to TDS, including payments for professional and technical services, rent, and other services.

### **Relevant Circulars and Notifications**

1. **Circular No. 1/2014, dated 13.01.2014:**
- This circular issued by the Central Board of Direct Taxes (CBDT) provides clarity on the issue. It states that TDS should be deducted on the amount paid or credited to the service provider excluding the service tax. The relevant portion of the circular says:
- "In other words, TDS should be deducted on the value of the services rendered and not on the service tax component, if the service tax is separately shown."

- **Circular Link**: [Circular No. 1/2014](https://incometaxindia.gov.in/communications/circular/circular_1_2014.pdf)

2. **Circular No. 4/2008, dated 28.04.2008:**
- This circular clarifies that TDS should not be deducted on Service Tax, and provides similar guidelines for various types of payments, including payments for professional services.

- **Circular Link**: [Circular No. 4/2008](https://incometaxindia.gov.in/communications/circular/circular_4_2008.pdf)

### **Relevant Sections**

- **Section 194J**: Deals with TDS on payments for professional or technical services.
- **Section 194C**: Deals with TDS on contracts. It applies to payments for contracts, including those where the service provider is engaged for specific tasks.

### **Key Points to Note**

1. **Service Tax Separate from TDS**: TDS should be calculated on the amount excluding Service Tax. If Service Tax is shown separately in the invoice, the TDS should be applied only on the base amount.

2. **Agreement Terms**: The agreement between the parties should clearly specify that Service Tax is to be paid separately. The treatment of TDS should follow the principles laid out in the circulars and notifications, regardless of the agreement terms.

3. **Payment Disputes**: If there is a dispute about whether TDS should include Service Tax or not, the above circulars and notifications can be referenced as evidence to support the correct procedure.

### **Steps for TDS Deduction**

- **Review Invoices**: Ensure that the invoice from the service provider clearly separates Service Tax from the service charges.
- **Calculate TDS**: Deduct TDS on the amount excluding Service Tax.
- **File TDS Returns**: Report TDS in the quarterly returns (Form 26Q) accurately reflecting the amount of TDS deducted.

By following these guidelines and referencing the relevant circulars, you can ensure that TDS is deducted correctly, excluding the Service Tax component.

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