TDS on payment of Railway Freight

NO. It is not necessary to deduct the TDS on railway freight. But pl. ensure yourself that you should possess the railway receipt (i.e. proff of freight paid), also sagrigate the payment as under- Rail Transportation Charges Transportaion charges claim by transporter ( Loading of material at your site & unloiading at railyard) Also there is no need to pay service tax on Rails transportaion ( as it is not a transport vehicle under service tax act), but service tax on other services provided by transporter has to pay.

If u are making any payment for transportation by mode of railways, as per explanation III (c), 194C is not applicable. Carriage of goods and passengers by mode of railways are out of the purview of 194C. As regards of deduction of TDS by your purchaser is concerned, it is a debatable issue. I am of the view that, where seller enter in to transporttion contrcat at his own and make the payment to transporter, it is the seller only who is liable for deduction. Purchaser who is just reimbursing the amount is ultimately not entering in to any works contract and he is not liable for deductiuon any taxes.

Dear Sir,

I am dealing in exports of statinless steel utensils.Last Financial Year (2007-2008) I have given payment to concor for Rs.3 lac for railway freight but they have mention on their bill only freight and handling charges. I want to know that shount we deduct TDS or not. Pls write me asap.

 

Thanks

Vinay

 

I agree with CA. O.P. Agarwalla

TDS on Freight by TRAIN

 

Section 194C, exempts only “Goods Carrier”

 

(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum.

 

Later it defines Goods Carriages

(ii) “goods carriage” shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE;

 

Section 44AE (7) Explanation says, .—For the purposes of this section,—

(a) the expressions “goods carriage”5 and “heavy goods vehicle”5 shall have the meanings respectively assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988);

 

Now, Motor Vehicles Act, section 2(14) says

(14) “goods carriage” means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods;

 

Conclusion

1. No TDS if contractor is giving service of “goods carriage”
2. Goods carriage is for any Truck, Tempo, Auto, or the like
3. But does not include
   1. Services of Courier companies,
   2. Freight by Train
   3. Freight by Air
4. Thus, TDS will be levied on the above 3 services 

 

TDS is not applicable on Railway freight as per section Explanation  (iv)(c) of 194C

As per Sctio 194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—

(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;

(ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family,

of such sum as income-tax on income comprised therein.

As per Explanation  (iv)(c)  "work" shall include— carriage of goods or passengers by any mode of transport other than by railways;