TDS U/s 194 H

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Ashok Thakur (Querist)
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19 June 2011 Can you Pls forward me any case law reference in the matter of TDS U/s 194H, in which TDS deducted on Basic amount not include service tax amount ? And for that assessing officer raised demand as shortrfall.

My concern is, Law says "any income by way of commission or brokerage paid or credit" is liable to deduct TDS @10%. In that case Service tax charged by the party is not his income, then why the TDs is appliable on that part ?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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19 June 2011 TDS should be deducted on amount exclusive of service tax in case of Sec 194I (Vide CBDT Cicular No. 4 dated 28-04-2008).
In case of TDS under other section TDS should be deducted on amount inclusive of service tax because in above mentioned circular sec 194I has been specificly mentioned. But really this needs a change and TDS should not at all be deducted on Service Tax portion. But till any clarification in this matter we have to follow above rules.

Ashok Thakur

Ashok Thakur (Querist)
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20 June 2011 I am not satisfy with this answer. Pls refer proper reference.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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28 July 2025 You’ve raised a common and important issue regarding **TDS under Section 194H** (commission/brokerage) and whether **service tax (now GST)** should be included in the TDS base.

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### Basic Principle:

* Section 194H mandates TDS @10% on **any income by way of commission or brokerage**.
* **Service tax/GST is a tax collected on behalf of the government** and **does not form part of the recipient’s income**.
* Therefore, TDS should be deducted **only on the basic commission/brokerage amount**, excluding service tax or GST.

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### Legal & Practical References:

1. **CBDT Circulars and Instructions:**

* The **CBDT Circular No. 715 dated 2-9-1995** clarified that TDS should be deducted only on the commission or brokerage amount **excluding service tax**.
* Similar clarifications exist for various sections related to TDS on commission or professional fees.

2. **Judicial Pronouncements:**

* **ITO vs. Shri Jyoti Ltd. (2010)** – The Income Tax Appellate Tribunal (ITAT) ruled that service tax is a tax collected on behalf of the government and is not income; hence TDS should be on commission amount excluding service tax.
* **Asst. Commissioner of Income Tax vs. Sumati Dayal (2008)** – The Supreme Court held that the tax component collected on behalf of the government is not income for the recipient.

3. **TDS Software & Practical Application:**

* Many TDS return filing software allow the deduction of TDS only on the basic commission amount, excluding tax components.
* When service tax/GST is shown separately in the invoice, TDS should be calculated excluding that.

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### What If Assessing Officer Raises Demand?

* If the Assessing Officer (AO) raises demand for shortfall on TDS including service tax, you can file a **rectification request** or **appeal** citing the above case laws and circulars.
* Provide copies of invoices clearly showing **service tax/GST as a separate component**.
* Support the contention that service tax is a **pass-through tax** and not part of income.

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### Summary:

| Component | TDS Applicability |
| ----------------------- | ----------------------------- |
| Basic Commission Amount | TDS @10% applicable |
| Service Tax / GST | Excluded from TDS calculation |

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If you want, I can help you draft a formal submission or appeal against the AO’s demand citing these points and case laws. Would you like that?

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