Tds on freight & warehousing charges

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udit (Querist)
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25 September 2012 Assessee purchased goods from a vendor at a fixed rate. The vendor raised the invoice by bifurcating the selling price, freight and warehousing charges. Whether TDS is applicable on the freight & warehousing portion of the invoice or on the full value of invoice?
Whether TDS is attracted at all since the rate contract is for the supply of product?

CA. Subhash Dangi

CA. Subhash Dangi (Expert)
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25 September 2012 If the purchase transactions are regular in nature and vendor charges service tax on freight and warehousing charges in bill separately, then TDS @ 2% U/s 194C is applicable.
If the transaction is one time or not regular, it is better not apply TDS provisions provided the transaction is within the limit.

udit

udit (Querist)
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26 September 2012 But TDS under section 194C is applicable when there is some work contract. It is a case of simple purchase in which rate per unit is fixed by some rate contract. while presenting the bill vendor charges freight and warehousing charges and applicable service tax on it. whether TDS applies???

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Great question! Here’s how TDS works on freight and warehousing charges in your scenario:

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### Scenario Recap:

* You have a **rate contract for purchase of goods** from a vendor.
* The **invoice separates freight and warehousing charges**.
* You want to know if **TDS applies on freight & warehousing** and on what amount.

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### Key points:

#### 1. **TDS on Purchase of Goods**

* **TDS under Income Tax Act is *not* deductible on purchase of goods**.
* So, **no TDS on the basic price of goods** under any section (like 194C or others).

#### 2. **TDS on Freight and Warehousing Charges**

* Freight and warehousing are considered **services**, often treated as **contractual services**.
* **If these charges are shown separately**, and the vendor charges **service tax** on them, then **TDS @ 2% under Section 194C (payment to contractor)** applies **on these service amounts** (excluding service tax).

#### 3. **Is this a “work contract” or “contractual service”?**

* Section 194C applies to payments to contractors for **work done or services rendered**.
* Freight and warehousing can be treated as **services rendered by the vendor**.
* Even if the main contract is for purchase of goods, the **freight and warehousing charges are separate services** and hence TDS is applicable on these amounts.

#### 4. **Threshold limit**

* TDS applies only if payment in a financial year exceeds **Rs. 30,000** to a single vendor.

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### Summary:

| Amount | Is TDS Applicable? | If Yes, TDS Section & Rate |
| ------------------------------ | ------------------ | ----------------------------------------- |
| Purchase price of goods | No | - |
| Freight charges (separate) | Yes | Section 194C @ 2% (excluding service tax) |
| Warehousing charges (separate) | Yes | Section 194C @ 2% (excluding service tax) |

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### Important Notes:

* TDS is deducted **only on the taxable value** (excluding service tax).
* Vendor must issue a **proper invoice** with service tax on freight & warehousing.
* Keep **proof of payment** and **invoice** for compliance.

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If the vendor does not separate freight and warehousing charges, and lumps up the amount with goods price, then no TDS is applicable on the whole bill.

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**Do you want me to help draft a mail or a note for your accounts team on this?**

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