Tds (sec 194c)

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Anonymous (Querist)
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29 March 2012 In A.Y. 2011-12, TDS of one of my known person is 27381/- u/s 194C. Total amount credited is Rs. 12,33,532/- which is reflected in Form 26 AS. Now my question is whether any provisions of VAT or SERVICE TAX apply in this case?? The assessee is not registered in any such law. I anything is applicable, now what to do????

CA Nagaraj Bhat

CA Nagaraj Bhat (Expert)
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30 March 2012 What is the nature of service he do?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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28 July 2025 Here’s a clear explanation regarding your query about TDS under Section 194C and applicability of VAT and Service Tax:

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### 1. **TDS under Section 194C:**

* Section 194C applies to **payments made to contractors or sub-contractors** for carrying out any work (including supply of labor).
* In your case, the person has TDS deducted under Section 194C of Rs. 27,381 on payments of Rs. 12,33,532, which is normal.

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### 2. **Applicability of VAT (Value Added Tax):**

* VAT is a **state-level tax applicable on sale of goods** in most states.
* Since this payment relates to **contract services (work contract)**, VAT may or may not be applicable depending on the state laws.
* In many states, VAT on works contract is **applicable**, and the contractor must be registered under VAT law and charge VAT on the invoice.
* If the assessee (contractor) is **not registered under VAT**, technically they should not have charged VAT, and the principal (payer) may have some liability to deduct VAT or pay VAT under reverse charge in some states. But this varies by state.
* So check the **VAT law of the respective state** where the work was carried out.

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### 3. **Applicability of Service Tax:**

* Service Tax (now replaced by GST) applies on **services provided**.
* Before GST implementation (July 2017), service tax was applicable on **contract services** depending on whether the service is taxable.
* Works contract services were subject to service tax if the value of contract exceeded threshold limits (usually Rs. 10 lakhs).
* If the contractor is **not registered under Service Tax**, technically service tax should be paid by the payer under **reverse charge mechanism**.
* However, the payer must check whether service tax applies to the service in question.
* Since your AY is 2011-12 (pre-GST), service tax laws applied.
* If the person was not registered under service tax and service tax was applicable, the payer may have to pay service tax under reverse charge.

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### 4. **What to do if the assessee is not registered under VAT or Service Tax?**

* **For VAT:** Check the local VAT rules; you may need to consult a tax advisor for state-specific rules on works contract VAT.
* **For Service Tax:** If applicable, you may need to pay service tax under reverse charge and file returns accordingly.
* **Non-registration may attract penalties** for non-compliance under VAT or Service Tax laws.
* You should **inform the contractor to get registered** if they meet threshold limits.
* Maintain proper documentation for compliance.

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### **Summary:**

| Tax Type | Applicability | What to do if not registered |
| ----------- | --------------------------------------------------- | --------------------------------------------------------------- |
| VAT | Depends on state laws on works contract | Check state VAT law; consult tax advisor |
| Service Tax | Applicable pre-GST on works contract over threshold | Payer may pay under reverse charge if contractor not registered |
| TDS (194C) | Deduction on payment to contractor | Already deducted and reflected in Form 26AS |

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If you want, I can help you check specific VAT or Service Tax provisions based on your state or provide more guidance on compliance steps. Would that help?

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