TDS
This query is : Resolved
27 October 2009
Is TDS is to be deducted on tne bill of a building contractor in vat is included and no service tax is charged seperately
28 October 2009
dear gaurav.
if the contract is composite one i.e material + labour, then TDS is deductible
if the contract is composite one i.e material + labour, then TDS is deductible
29 October 2009
Dear Sir,
I want to know on that bill only vat is charged not service tax then how can we find out amount of material and labour for the purpose of TDS please reply
I want to know on that bill only vat is charged not service tax then how can we find out amount of material and labour for the purpose of TDS please reply
27 July 2025
Great question!
When you have a **composite contract** (i.e., it includes both **material and labour**), and **only VAT is charged** on the bill (no service tax), here's how to handle **TDS under Section 194C**:
---
### ✅ **TDS Applicability on Composite Contracts (Material + Labour)**
* **Section 194C** of the Income Tax Act mandates that TDS is to be deducted **on the entire contract value**, unless the **value of materials** is clearly mentioned **separately** and supported by **material invoices**.
---
### 📌 **Case 1: Material and Labour Amount Not Separately Mentioned**
If the bill is **inclusive (composite)** and **does not break up the material and labour part**, then:
👉 **TDS is to be deducted on the total invoice amount**, **including VAT**.
✅ Example:
* Invoice amount: ₹1,00,000
* VAT included: ₹4,000
* **TDS to be deducted on ₹1,00,000**, because labour portion is not separated.
---
### 📌 **Case 2: Material and Labour Amount Mentioned Separately**
If the contractor **clearly mentions** the material and labour separately (e.g., ₹70,000 materials + ₹30,000 labour), and gives **supporting material purchase proof**, then:
👉 **TDS is to be deducted only on the labour component** (₹30,000).
This must be backed by proper **break-up in the contract** or **invoice**, along with relevant documentation.
---
### ❌ Why VAT Inclusion Doesn’t Matter for TDS?
Even if VAT is charged, **TDS is based on the gross payment** to the contractor unless exclusions are specifically allowed (like separate material component).
---
### 🔍 Important Note (CBDT Circular):
Per **CBDT Circular No. 715 dated 8-8-1995**, question 29:
> *In a composite contract involving supply of goods and services, if the invoice does not separately mention the value of materials, TDS should be deducted on the gross amount.*
---
### ✅ Summary:
| Situation | TDS Deducted On |
| --------------------------------------- | ---------------------- |
| No breakup of material & labour | Full invoice incl. VAT |
| Clear breakup & proof of material value | Only on labour portion |
---
Let me know if you want a **sample TDS calculation** or **journal entry format** for this case.
When you have a **composite contract** (i.e., it includes both **material and labour**), and **only VAT is charged** on the bill (no service tax), here's how to handle **TDS under Section 194C**:
---
### ✅ **TDS Applicability on Composite Contracts (Material + Labour)**
* **Section 194C** of the Income Tax Act mandates that TDS is to be deducted **on the entire contract value**, unless the **value of materials** is clearly mentioned **separately** and supported by **material invoices**.
---
### 📌 **Case 1: Material and Labour Amount Not Separately Mentioned**
If the bill is **inclusive (composite)** and **does not break up the material and labour part**, then:
👉 **TDS is to be deducted on the total invoice amount**, **including VAT**.
✅ Example:
* Invoice amount: ₹1,00,000
* VAT included: ₹4,000
* **TDS to be deducted on ₹1,00,000**, because labour portion is not separated.
---
### 📌 **Case 2: Material and Labour Amount Mentioned Separately**
If the contractor **clearly mentions** the material and labour separately (e.g., ₹70,000 materials + ₹30,000 labour), and gives **supporting material purchase proof**, then:
👉 **TDS is to be deducted only on the labour component** (₹30,000).
This must be backed by proper **break-up in the contract** or **invoice**, along with relevant documentation.
---
### ❌ Why VAT Inclusion Doesn’t Matter for TDS?
Even if VAT is charged, **TDS is based on the gross payment** to the contractor unless exclusions are specifically allowed (like separate material component).
---
### 🔍 Important Note (CBDT Circular):
Per **CBDT Circular No. 715 dated 8-8-1995**, question 29:
> *In a composite contract involving supply of goods and services, if the invoice does not separately mention the value of materials, TDS should be deducted on the gross amount.*
---
### ✅ Summary:
| Situation | TDS Deducted On |
| --------------------------------------- | ---------------------- |
| No breakup of material & labour | Full invoice incl. VAT |
| Clear breakup & proof of material value | Only on labour portion |
---
Let me know if you want a **sample TDS calculation** or **journal entry format** for this case.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Selecting Tax Regime while for calculating tax relief on under Section89 of income tax act 1961.
- Relief Calculation u/s 89 of ITax 1961 in TableA Form10E
- Cloud service
- Forgot to update debit note in gst
- GST ON FOREIGN CLIENT
- Can we issue an invoice today
- SALE OF GOODS FROM OTHER STATE
- Running non ac bus under contract with roadways
- GST ITC on Liquidated damages
- Sale of Gold ornaments
- Tds on GST in connection with sale to public company
- B2B Amendment
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
- Regarding Advance Tax not claimed in the Return of Income for A.Y. 2025-26
- No Compliences after incorporation
- USEFUL LIFE OF USED/SECOND HAND COMMERCIAL VEHICLES
- Claiming TDS deducted by builder on Hardship compensation and Corpus
- Address Change to another state of a Registered Trust with 12AB approval
- Updated return in budget 2026
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
