There has been confusion with regard to inclusion of Service Tax component in respect of Payments which are also subject to Tax Deduction at Source (TDS). Earlier the CBDT had issued a Circular No 4/2008 , wherein in respect of Rent Payments, it was clearly mentioned that the TDS Shall be deducted only on the Rent Portion of the Payment only and Service Tax Shall be excluded from TDS Payments. But in respect of other payments, it was not clear whether the Service Tax component has to be included for TDS Deduction or not.
The CBDT has vide its Circular No 1/2014 dtd 13th January 2014 has clarified this position and as per this circular, it has been clarified that wherever in terms of the agreement/contract between the payer and the payee, the service tax component in indicated seperately, TDS shall be deducted on the amount paid/payable without including the service tax component.
The relevant circular is reproduced below :-
[gview file=”http://bssridhar.com/blog/wp-content/uploads/2014/01/19012014_Circular-No.-1-2014.pdf”]
Timely very useful communication. We feel proud of being a member. Thanks a lot!
Timely help for us. You are the Guru in need. Hats off to your service.
Dear Sir,
Kindly clarify the CBDT circular dt 13-1-2014 on No tds to be deducted on service tax applicable from which date ?
My view is that since it is a clarificatory circular it applies retrospectively also.
Mr. Shekar,
As you have pointed out, theres no specific effective date given in the said circular. In the absense of the same, im also of the opinion that the same shall be applicable retrospective..
Thanks for your kind reply, sir.
Dear Sir,
By reading in between the lines of paragraph 3 of the circular it can be interpreted that the concept of separation of Service tax is applicable for every payment as it is beginning with the words that the matter has been examined afresh and tax deducted shall be deducted under chapter XVII B i.e., it covers every payment… Pl… clarify
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Best regards,
CA .Gupta B Gullapudi MBA., FCA.,
Mob: 970 19 45677
Yes. Where the service tax is mentioned seperately, it shall not be included in the amount to be considered for TDS.