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TDS on Gross Value

18 July 2007

Hi all

Plz let me know wether TDS is deducteable on payment for services is Gross value or Net Value. Gross valu = Net Value + Service Tax.

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11 Replies

Ajay Chaudhary (CA) (63 Points)
Replied 18 July 2007

As per Sec 194 J TDS is to be deducted from the fees that is charged for the professional services. Service Tax is not a fees for professional services. Therefore Tds should be deducted from the net value

vikascs (16 Points)
Replied 18 July 2007

HI Ajay. I beleive u r mistaken. TDS is to charged on Gross payments (i.e inclusive of Service Tax) Because IT acts says tds is to be deducted on payments which includes service tax as well

shrabani dutta (CA final student) (110 Points)
Replied 18 July 2007

AS per the Act. TDS is to be deducted on the amount paid or credited and the amount paid/ credited is including service tax.So TDS should be deducted from the Gross amount.

Sonia Uthuppu (Chartered Accountant) (34 Points)
Replied 18 July 2007

Section 194J refer to any sum paid. Obviously, Service Tax cannot be deducted out of the bill amount for the purpose of tax deduction at source. The Central Board Of Direct Taxes issued a circular 715 dt 8/8/1995, which support the above view. Also, you may refer to Honorable Supreme Court’s decision in Associated Cement Co. Ltd vs CIT[1993] 201ITR435, upholding that the payer should deduct the tax on gross amount.

Ramesh sharma (employee) (18 Points)
Replied 18 July 2007

hi freinds, TDS can be deducted on net amount chrged excluding service tax .. the base for that - 1. Service tax is a tax & one need not pay tax on tax 2. since you utilise the Service tax credit, the expense charged to P&l is only net of service tax. so deduct TDS on net value. since the service tax input credit you are taking the ful amount & not on the net of TDS. However on a conservative basis TDS can be deducted on Gross value incl service tax

vanita gupta (chartered accountant) (16 Points)
Replied 19 July 2007

hi
As per Sec 194C, tds is deducted on any " SUM P AID" , therefore deductible on gross value.
but in Sec 194J , the word sum is not writtten , even then it is a general practice to deduct tds on gross amount.

vivek kumar agarwalla (Article Assistant) (67 Points)
Replied 28 June 2009

what about TDS under section 194C? Since some of the services covered under this section also come under the net of service tax, TDs should also be deducted on gross amount on these services too. This is my view. What Do all of you think

Anumanchipalli Sathikonda (Tax Consultant) (1349 Points)
Replied 28 June 2009

Good evening everybody

In 2008 April the CBDT has clarified in respect of TDS u/s 194I that service tax can be excluded for the purpose of deduction of tax at source.

Experts say that ratio may be applied to other sections also. Any how CBDT must come out with further clarification. Otherwise there will be prolonged litigation if TDS is not effected on payments made under other sections other than section 194I.

The circular No.4 of 2008 dated 28-4-2008. I am herewith attaching a copy of the ciruclar for your ready reference.

Best Wishes

Sathikonda

Attached File : 54 circular no 4 of 2008 dated 28 4 2008.doc downloaded: 382 times

amit kumar (Article asst.) (21 Points)
Replied 26 March 2010

The issue of TDS on service tax is getting hotter by the day. This issue got fuel with the issuance of a circular by the CBDT. In this circular, board has clarified that tax deduction at source (TDS) under sections 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax. [Circular no. 4 dated 28-4-2008]

After this clarification, every body was of the view that the principle enunciated by this circular is applicable to all the payments made by the assessee and accordingly no TDS is deductible from on the part of service tax whether it is professional's bill or contractor's bill.

But, to settle the issue, CBDT has issued another clarification vide circular F. NO. 275/73/2007IT(B) dated 30-6-2008. In circular CBDT has clarified that the scope of benefit of Circular no. 4 dated 28-4-2008 can not be extended to the payment made under section 194J (Fees for professional and technical services).

Therefore, TDS is to be deducted on the gross amount inclusive of service tax where the payment is being made u/s 194J.

From the reading of both the clarifications, the reasons for two stands in two situations can be discussed as under:

Chapter XVII - Part B - Deduction at source

Section 194J - Sub Section (1) starts as:

(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of—

xxxxxxx

Section 194I - the provisions of this section starts as:

Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall…………

xxxxxxxxx

Section 194J speaks about deduction of tax at source (TDS) on any sum which is paid to the recipient.

But, Section 194I speaks about the deduction of tax at source (TDS) on any income paid as rent.

CA BIREN SHAH (employee) (467 Points)
Replied 26 March 2010

in case of RENT tds to be deduct on NET value in all other cases it will be deducted from gross valve i.e. including servie tax

Mukesh Katara (Account manager) (533 Points)
Replied 03 April 2010

Good afternoon friends

i think not deducted tds on service tax.....no evidance for this...but service tax not our expenses …it is tax so only tds deducted on net value(not including service tax)..

pls discuss with it department TDS officer.