TDS on Cash back

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This discussion explores whether cash back payments, offered by a service provider ('A') to a client ('B') based on sales volume, are subject to Tax Deducted at Source (TDS). The query questions if such cash back, essentially a volume discount, should attract TDS under Section 194H. The prevailing view is that it's a discount and therefore not liable for TDS on commission.

Gouri Sankar Tripathy

Gouri Sankar Tripathy (Querist)

19 September 2020 Hi Experts,
Need some guidance on the below topic:
"A" provides service to "B" and raise an Invoice for the service provided. At the end of the year, based on the volume of business, "A" needs to pay back 5% of the total Sales amount to "B". This is something which they termed as cash back in commercial parlance.
E.g. If total sales during the year is Rs.1,00,000, then at the end of the year A has to pay Rs.5000 to B as cash back amount for the business given by B to A.
The question here is, whether the cash back amount is subject to TDS? If yes, will it attract TDS u/s 194H?
Please suggest.
Thank you!

CA PARTH SHAH

CA PARTH SHAH (Expert)

20 September 2020 According to us, this is sort of discount given to the customer based on the sales made by them. So it should not be liable for TDS on commission under section 194H

Message likes : 1 times

Gouri Sankar Tripathy

Gouri Sankar Tripathy (Querist)

22 September 2020 Appreciate the feedback Parth Ji.

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