tds applicable on supply orders

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Querist : Anonymous

Querist : Anonymous (Querist)

16 June 2011 is tds u/s 194c applicable to pure supply orders if yes at what rates. Eg. Supply order for cement, steel by govt. Dept. Please reply with suitable quotes

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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16 June 2011
Supply Orders are not covered under "work" .
Explanation (iv) to Section 194C provides an inclusive definition of "work" and explains that
work does not include manufacturing or supplying a product to the requirement or specification of a customer by using material purchased from a person, other than such customer.

Querist : Anonymous

Querist : Anonymous (Querist)

16 June 2011 while making payment is tds applicaele if yes rate and section (supplier oppose any deduction;

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Hey! Let me clarify the **TDS applicability on supply orders** like for cement or steel supplied to a government department.

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### Key points on TDS under **Section 194C** for supply orders:

* **Section 194C** applies to payments made to contractors for carrying out any work, including advertising, broadcasting, telecasting, manufacturing or supplying a product according to the customer's specification.

* **Explanation (iv) to Section 194C** clearly states:

> "Work" **does not include** the **manufacturing or supplying of a product** to the requirement or specification of a customer by using materials purchased from a person other than such customer.

* In simple terms, **pure supply of goods without any associated services or installation is not considered a "work contract"**.

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### Therefore:

| Scenario | TDS Applicability under Section 194C? | Comments |
| --------------------------------- | ------------------------------------- | ------------------------------------------------------------------------ |
| Pure supply of cement, steel etc. | **No TDS under Section 194C** | Pure supply of goods is **not work contract** |
| Supply plus installation/service | **Yes, TDS applicable** | When supply involves service/installation, it qualifies as work contract |

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### Applicable TDS rates if Section 194C applies:

* **1%** if payment is made to an individual or HUF (Hindu Undivided Family).

* **2%** if payment is made to others (like companies, firms).

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### On pure supply orders:

* **No TDS under Section 194C should be deducted**.

* However, if the supplier insists on no TDS, you can refer to Explanation (iv) to Section 194C as the legal basis.

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### Summary:

| Payment Type | TDS Deductible? | Relevant Section | Rate |
| ------------------------------------ | --------------- | ----------------------- | ---------------------------- |
| Pure supply of goods (cement, steel) | No | Section 194C (excluded) | N/A |
| Supply + services/installation | Yes | Section 194C | 1% (Individual), 2% (Others) |

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If you want, I can help draft a formal response/email quoting the section and explanation for your supplier or department.

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