TDS on consultancy fees

He is not to charge service tax on the ESIC dues he deposits on your behalf. That is as a pure agent. He has to only charge service tax on his service fees and on that you apply 194J including the service tax amount.

TDS is never deducted on reimbursement of expenses.

In my opinion, u should not deduct TDS and ask the vendor to cancell the previous invoice and raise a new invoice without service tax.

Though it is a reimbursement, it is your expenses as a part of his service, you need to deduct the TDS at the applicable rates.

Though it is a reimbursement, it is your expenses as a part of his service, you need to deduct the TDS at the applicable rates.

Here i do agree with Mr. Anand and TDS would have to be deducted at applicable rates....

NO , TDS shall required to deduct in this case, vendor has Incurred Exp. while acting as PURE AGENT. U should ask vendor to raise new Bill without ST. Sunil and Fatema r Correct  I think other 2 Guys r dont know abt Pure Agent.

Harshalji. If I pay your statutory dues like income tax, sales tax , PF, ESIC and give you bill / challan that are logically in your name and not my name, there is no TDS on this if billed separately with proof. If this were the case, then most of the CAs would have a cash flow problem as they pay income tax online for their clients and are reimbursed for the same. It would be very stiff to deduct 10% on what they pay on your behalf as a pure agent. You cannot say that paying the income tax is a part of the CAs service to the client. The income tax itself is not a part of the service. However if he charges for his time and infrastructure usage to make all these payments, then only that portion will attract service tax and TDS

Simply :

No TDS on reimbursement of ESIC.

TDS U/s 194J on the amount charged or billed as professional charges including Service Tax.

Agreed Mr. sunilJI...

But here dilip has not mentioned that the reimbursement is of the purchaser party or the vendor party...I hv given my opinion based on the vendor party ESIC charges...

I was of the opinion dat here vendor had reimbursed his own expenses thru purchaser party which nowadays happens pratically....

Reimbursement of expenses incurred by vendor for performing / carrying out work for the client will attract deduction of TDS.

No TDS on reimbursement amount. ask to revise the bill without service tax on reimbursement amount.

Dear Amit kakani....

Pls see my above opinion and pls do tell me dat whether i am right or wrong....I am counting on u....

plz....quote any circular, notification or section which prohibits deduction of tds on reimbursment.

in this case then contractor or professional can easily break up his invoice into salary exp  conveyance etc...and tds wud be only deducted on his gross profit per bill

If you go by circular 715 of 1995 reimbursement to C&F Agent for freight attracts TDS as he is not an agent of the shipping company.

There has always been disputes with department regarding TDS on duty amounts paid by CHA for customs duty etc. There are conflicting views as the sections speak on payment of any sum. However, there is also a judgement of Supreme Court (1999) in section 195 that if any amount is paid as a reimbursement for expense abroad and the same is not taxable in India, no TDS is to be deducted provided there is no profit element in the reimbursement. Usually the same principal would apply in these cases also. However, department always contends that the professional or the agent while investing money for you has the motive of profit in the fees that he receives and therefore it is part of his income and TDS should be applied.

Therefore if the professional or agent has invested money for you and you pay him later, you have to apply TDS but not service tax. However, if you are giving cash to the agent and tell him to pay the ESIC dues, there is no service tax or TDS as he is simply carrying your cash (as an imprest a/c) to go and pay your money and you get the receipt from ESIC in your name.

The last para above is what our accountant does. If amounts are small he gives cash, takes a confirmation of the person that he has taken cash to go and make the government payment and then attaches the challan copy when it comes. The best obviously as is done for large payment is to issue blank cheque with not over amount (ceiling) and name of department and preferably the a/c number on face or at least behind the cheque and let the agent fill the amount as necessary.

Harshall, you are right. The problem is there if the agent pays first and then you reimburse him. Ditto if you pay advance as at that time no payment of tax or ESIC has been made and the whole thing has to be treated as agents income. Best is to give cash to pay on your behalf and get the cash received challan in your name. There is no limiton payment of cash to government. Your agent can take cash from you to make payments as much as your employee can do the same.

Thanks Sunil...