10 November 2009
We would like some explanation on section 194C, its applicability in transactions where Material is supplied by Customer and the supplier adds certain other material and supply it back to the customer:
e.g. Suppose X Ltd sold some "A" material to Y Ltd and Y Ltd added "B" material to "A" and sold "AB" material to X Ltd.
Then in such case is it require to deduct TDS under the provisions of New Section 194C.
10 November 2009
If you read the latest provisions from this year for Section 194C, If the buyer is getting any material manufactured from the seller and he provides any material to the seller, TDS is applicable u/s 194C. The condition is seller can make anything as per specifications of buyer provided he has not purchased any of the raw material or intermediate from the buyer. He has to purchase everything in manufacture from persons other than the buyer. This provision was added to bring in factories and ancillary units who did job manufacture for the principal.
10 November 2009
In the given example, if Y Ltd purchased goods from X Ltd and Y ltd adds labour on it and raises invoice to X ltd in such a way that the material and labour cost are shown separately in the said invoice, then X Ltd had to deduct income tax necessarily on the labour component alone w.e.f 01/10/2009.
10 November 2009
Agreed. However, if the new product itself is sold after manufacturing by using product procured from buyer, without segregating the billing then the whole bill suffers TDS. Therefore it is better to show a seperate processing charge. Refer clause (iv)(e). "Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer"
The scope is not just on job work. It is in manufacture of the article. Therefore They will have to show the cost of material and process separately and deduct TDS on processing charges or job work. Moreover, VAT will be paid on the entire transaction.
10 November 2009
Material is sold to y Ltd he added / manufactured material and sold to any party by Invoice under Excise Rule. then TDS Not applicable. if y is not chagin job charges then how TDS applicable on that.
10 November 2009
Ram Avtarji. The substituted Section 194 C reads as "Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer"
11 November 2009
if he is saleing goods to only to suppliier of material then TDs to be deduct. if he is seling goods in open market then TDs not applicable.
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