Tds - service tax

This query is : Resolved

CA Yash Marda (Querist)
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30 May 2012 Dear Sir,
I have the following query relating to TDS.

Consider a Bill drawm on a client for Audit Work.

PROFESSIONAL CHARGES : Rs.10,000
Service Tax @ 12.36% : Rs. 1,236

Total Bill Amount : Rs. 11,236

Q.1 > When Client makes payment to us. He should deduct TDS @ 10% on Rs.10,000 i.e. the professional Charges or Total of 11,236 ?
Q.2 > If TDS to be deducted on 11,236 what is the logic behind it as Service Tax is an indirect tax and we are quarterly paying service tax collected to the Govt. So why Deduct TDS on the amount including Service tax.

Would be really grateful for clarifications ??

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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30 May 2012 TDS will be deducted on Rs. 11,236. This is so because Section 194J uses the words "any amount paid". Any amount includes service tax.

Compare this with Section 194I which uses the words "income". Service tax is not the income of the recipient and accordingly u/s 194I, TDS is deducted on the amount excluding service tax.

Read circular 4/2008.

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