NO TDS on Service tax

By | July 29, 2015

Question : Whether TDS is to be deducted on the  amount of the Bill including Service tax  or amount of the bill excluding Service Tax ?

Answer NO TDS on Service tax is to be deducted  if as per the  terms of the agreement between the payer and the payee, the service tax component comprised in the amount is indicated separately.

Thus TDS is to be deducted on the amount of the bill excluding service tax,

Example :-

If the Bill of  professional is received for Rs 100 Plus service tax of Rs 14  and the total bill amount is 114 then the TDS will be deducted on Rs 100  only.

Reference :-

Vide Circular No. 1/2014, dated 13.01.2014 referring to the Rajasthan High Court’s decision inCIT(TDS) v. Rajasthan Urban Infrastructure  IT APPEAL NOS. 222, 235, 238 & 239 OF 2011, CBDT clarified that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and has not been included in the fees for professional services or technical services, no TDS is required to be made on the service-tax component under section 194J of the Income-tax Act, 1961. Pursuant thereto, the CBDT also decided in exercise of powers under section 119 that wherever the terms of the agreement between the payer and the payee, the service tax component comprised in the amount is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Income-tax Act, 1961 on the amount paid without including such service tax component.