Tds on contract amount
This query is : Resolved
12 March 2018
Contract amount 100000
GST@18% 18000
Total bill Amount 118000
TDS U/S 194C will be deducted @1% from 100000 or 180000?
GST@18% 18000
Total bill Amount 118000
TDS U/S 194C will be deducted @1% from 100000 or 180000?
CA R SEETHARAMAN
(Expert)
12 March 2018
TDS is to be deducted on 1,00,000 only
Message likes :
1 times
14 March 2018
Is there any specific section or notification regarding the issue?
Please provide the details
Please provide the details
27 July 2025
Great question! Here’s the clear answer with references:
---
### **TDS on Contract Amount Including GST**
* **TDS under Section 194C (Payment to Contractors)** is to be deducted **only on the amount payable for the contract work** — i.e., **excluding GST**.
* GST is a **tax collected on behalf of the government**, and not part of the contract income. Hence, TDS is **not deducted on GST**.
---
### **Legal Basis / Reference**
1. **CBDT Circular No. 715 dated 24-11-1995** — clarified that TDS should be deducted on the **contract value exclusive of taxes**.
2. **CBDT Circular No. 5/2017 dated 7-7-2017** (regarding GST and TDS):
It clearly states that **TDS deduction under various sections including 194C shall be on the amount excluding GST**.
3. **Section 194C of Income Tax Act, 1961** — refers to “payment to contractor for carrying out any work,” which does not include GST as it is a tax component and not consideration for work.
---
### **Summary:**
| Particulars | Amount (Rs.) |
| ----------------------- | -------------------------- |
| Contract value | 1,00,000 |
| GST @ 18% | 18,000 |
| Total Bill Amount | 1,18,000 |
| **TDS Deductible @ 1%** | **1,000** (1% of 1,00,000) |
---
If you want, I can help you draft the exact note/explanation to give to your accounts team or vendor for clarity. Would that help?
---
### **TDS on Contract Amount Including GST**
* **TDS under Section 194C (Payment to Contractors)** is to be deducted **only on the amount payable for the contract work** — i.e., **excluding GST**.
* GST is a **tax collected on behalf of the government**, and not part of the contract income. Hence, TDS is **not deducted on GST**.
---
### **Legal Basis / Reference**
1. **CBDT Circular No. 715 dated 24-11-1995** — clarified that TDS should be deducted on the **contract value exclusive of taxes**.
2. **CBDT Circular No. 5/2017 dated 7-7-2017** (regarding GST and TDS):
It clearly states that **TDS deduction under various sections including 194C shall be on the amount excluding GST**.
3. **Section 194C of Income Tax Act, 1961** — refers to “payment to contractor for carrying out any work,” which does not include GST as it is a tax component and not consideration for work.
---
### **Summary:**
| Particulars | Amount (Rs.) |
| ----------------------- | -------------------------- |
| Contract value | 1,00,000 |
| GST @ 18% | 18,000 |
| Total Bill Amount | 1,18,000 |
| **TDS Deductible @ 1%** | **1,000** (1% of 1,00,000) |
---
If you want, I can help you draft the exact note/explanation to give to your accounts team or vendor for clarity. Would that help?
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