TDS U/S 194C

[shamji bhanushali]

I WANT TO KNOW ABOUT TDS APLICABLE U/S 194C ON OFFICE FURNITURE WITH INTERIOR DECORATION WITH MATERIAL CONTRACT. AND CONTRACTOR ISSUE BILL WITH VAT 8% AND SERVICE TAX 4.944% IT IS PROPER?

[Ganeshan Kalyani]

The rate of TDS under 194C is 1% for Individual / HUF and for others 2% on contract value without service tax. Secondly, the VAT charged is correct as he may have opted for composition scheme. The service tax charged by contractor seems to be incorrect, because the contract with material and service element falls under reverse charge mechanism under heading works contract service. Accordingly only 2.47% service should only be levied by him if provider of service is other than company and recipient of service is company.

Refer Notification no.30/2012-Service Tax.

AI Summary

TDS on contracts: withhold on contract value excluding service tax; works contract reverse-charge alters service tax levy.
TDS must be deducted on the contract value excluding service tax, with different withholding rates for individual/HUF payers and other payers. VAT may be correct if the contractor is under a composition scheme. Contracts for furniture and interior decoration incorporating materials are treated as works contract service and, where applicable, service tax is subject to the reverse charge mechanism; the contractor's invoiced service tax may therefore be excessive. Refer to Notification no.30/2012-Service Tax for the applicable allocation under works contracts.