Should we be charging service tax?

your client deduct tds 10 % on it. show 10k as tds receivable. 

Thanks for the reply .. 

Are you trying to say that we can always claim it later as TDS recoverable, i.e. during settlement of accounts or during payment of yearly tax?

you can pass entry of tds receivable in party account than party account will settle. 

makes sense .. thanks

We have some more development work going on for the same client .. 

We're planning to invoice him 10.3% service tax in addition to the agreed amount .. would that be alright?

We can then get what is rightfully ours than wait for the TDS settlement etc ..

you will claim the tds deducted at the time of filing the income tax return

service tax is applicable if gross amount of taxable services exceeds 10 lakh in a FY