Applicability of TDS

[madhavvan n]

a vehicle maintenance company which services vehicles and also supplies parts to customers some customers are deducting tax u/s 194c on the entire invoice value the vehicle maintenance company contends that tds should be only on labour portion and not on supply pls give your views

[Rama Krishana]

Service Tax on 194C is to be deducted on works contract. Where the service contract and sale contract are independent, only service contract would be subject to TDS. Now, it is the matter of fact that both the contract are part of the same contract or independent service contract and sales contract. To my mind, service tax should be deducted on the gross amount including value of material since the material is used by the service provider while providing his services even though he is showing the amount of material separately in the bill.

AI Summary

TDS on contract payments extends to gross invoice when materials are supplied as part of service, not just labour. The query concerns whether TDS on contract payments should be limited to the labour/service component or extend to the entire invoice when materials are supplied. If service and sale contracts are independent, TDS attaches only to the service portion. If the supply of materials is integrated into the service (a works contract or combined contract), TDS should be deducted on the gross invoice amount, including material value, because the materials are used by the service provider in rendering the service.