Tds on contract amount

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RAKESH (Querist)
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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?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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12 March 2018 TDS is to be deducted on 1,00,000 only

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RAKESH

RAKESH (Querist)
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14 March 2018 Is there any specific section or notification regarding the issue?
Please provide the details

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Great question! Here’s the clear answer with references:

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### **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**.

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### **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.

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### **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) |

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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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