TDS ON CONTRACTORS

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DEVENDRA (Querist)

26 May 2009 IS IT COMPULSORY TO DEDUCT TDS ON PAYMENTS MADE TO TRANSPORTERS. CAN WE CONVINCE THE ASSESSING OFFICER ON THE GROUND THAT WE HAVE NOT ANY CONTRACT WITH A TRANSPORTER WRITTEN OR ORAL. IT IS ONLY ADJUSTMENT TO USE HIS SERVICE TO DESPATCH THE GOODS.

CA.Tarun Maheshwari

CA.Tarun Maheshwari (Expert)

26 May 2009 I dont think it shall be possible. They will not agree on the term 'Adjustment'. Their question shall be 'why do you want to do so or not to deduct TDS of transporter'. In that case, you will need a strong explanation, which seems difficult in such obvious cases.

CA E.A.Ravikumar

CA E.A.Ravikumar (Expert)

26 May 2009 Circular : No. 715, dated 8-8-1995 clarifies the situation.

Question 9 : In case of payments to transporters, can each GR be said to be a separate contract, even though payments for several GRs are made under one bill ?
Answer : Normally, each GR can be said to be a separate contract, if the goods are transported at one time. But if the goods are transported continuously in pursuance of a contract for a specific period or quantity, each GR will not be a separate contract and all GRs relating to that period or quantity will be aggregated for the purpose of the TDS.

clarification apart, why we should try to find a way not to deduct tax ? If the transporter feels the TDS rate is high then he has the option of approaching the department to get certificate for deduction of tax at lower or even NIL rate.