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Tds on purchase of lift

anonymous (proprietor) (237 Points)

14 December 2016

I have purchased a lift. The value of service is mentioned separately in the bill. Whether tds is to be deducted on the entire bill value or just the value of services? Also tds to be deducted under section 194C?

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Sanjay S (Chartered Accountant) (1375 Points)
Replied 14 December 2016

NO TDS on Service Tax:

As per the CBDT Circular 1/2014 dated 13.01.2014, TDS need not be made on the amount of service tax included in the invoice, provided, the Service tax amount is shown separately.

Since in your case, the ST amount is shown separately, the Tax needs to be deducted only on the Service amount (Exclude ST)

Now coming to the issue of Applicability of TDS to above transaction:

TDS u/s 194C will apply only if the supply & Installation of Lift - fits the definition of Works Contract u/s 2(43) of the Act.

This has proven to be a highly litigated area for last couple of years and finally in 2014, the Honorable Supreme Court put the issue to rest by giving a comprehensive 219 page judgement in Kone Elevator India Pvt Ltd v State of Tamil Nadu and ors (2014-TIOL-57-SC-CT-CB).

The larger (5-Judge) bench of the Apex court, held that the contract for manufacture, supply and installation of lifts in a building is a “works contract” and not a “contract for sale”. The decision has been taken by majority rule with four members ruling in favour of the decision versus one against.

The case is a landmark decision, not only for contracts for sale and installation of lifts, but for all similar contracts. Many contracts in different industries have been treated as sales contracts because the labour and service elements were considered to be secondary in value compared to the supply of goods. This way of classifying works contracts has been held by the court to be incorrect.

On a conclusive Note, I say that TDS u/s 194C shall have to be made on the SERVICE PORTION only (Exclude ST amount if shown separately).

Hope this clarifies the issue.