Tds on divisible works contract
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
08 March 2015
A contract has been awarded for maintenance purposes with three distinct portions (with rates/ prices) separately indicated:
(i) Materials to be used in the maintenance job on as and when required basis. List of items with corresponding prices / rates has been indicated in the price schedule. VAT is separately indicated in the price schedule. Quantity shall be as and when required basis. invoicing will be done as per actual quantity used while performing the job at the contract price.
(ii) Pure services: Service tax has been indicated in the price schedule on 100% vavlue of services.
(iii) Comprehensive services NOT involving items indicated at (i) above but using items not separable from the services being rendered. Service tax has been indicated on 70% of comprehensive services and VAT on applicable portion of comprehensive sevices.
A question has arisen as to whether TDS on total contract value will be applicable here or not. One view holds that since the rates of materials and services portion have been indicated separately, the contract is a divisible contract and therefore, TDS on total value of contract is not applicable. TDS will be applicable only on portion (iii) of contract i.e. comprehensive services. Other view opines that since the intension is maintenance services involving materials at (i) above, where quantity of different items is not fixed and is dependant on actual requirement, price schedule containing materials portion cannot be treated as separately defined in contract. This view is countered by the earlier opinion that invoice will be clearly indicating materials and services portion separately making the contract divisible, therefore, there is no question of applicability of TDS on total contract value.
Both views have been supplemented by various opinion available in internet and tax consultants. Please provide your considered opinion on the same.
Regards.
(i) Materials to be used in the maintenance job on as and when required basis. List of items with corresponding prices / rates has been indicated in the price schedule. VAT is separately indicated in the price schedule. Quantity shall be as and when required basis. invoicing will be done as per actual quantity used while performing the job at the contract price.
(ii) Pure services: Service tax has been indicated in the price schedule on 100% vavlue of services.
(iii) Comprehensive services NOT involving items indicated at (i) above but using items not separable from the services being rendered. Service tax has been indicated on 70% of comprehensive services and VAT on applicable portion of comprehensive sevices.
A question has arisen as to whether TDS on total contract value will be applicable here or not. One view holds that since the rates of materials and services portion have been indicated separately, the contract is a divisible contract and therefore, TDS on total value of contract is not applicable. TDS will be applicable only on portion (iii) of contract i.e. comprehensive services. Other view opines that since the intension is maintenance services involving materials at (i) above, where quantity of different items is not fixed and is dependant on actual requirement, price schedule containing materials portion cannot be treated as separately defined in contract. This view is countered by the earlier opinion that invoice will be clearly indicating materials and services portion separately making the contract divisible, therefore, there is no question of applicability of TDS on total contract value.
Both views have been supplemented by various opinion available in internet and tax consultants. Please provide your considered opinion on the same.
Regards.
08 March 2015
It is being maintenance contract normal practice adopted in companies is deduct TDS on total contract value.
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