TDS ON SERVICE TAX COMPONENT OF A BILL

CBDT had issued a Circular no. 1/2014 dated 13-01-2014 where it is clarified that wherever in terms of the agreement between the payer and payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

Earlier Board had issued  a Circular No.4/2008 dated 28-04-2008 wherein it was clarified that tax is to be deducted at source under section 194-I of the Income-tax Act, 1961 (hereafter referred to as 'the Act'), on the amount of rent paid/payable without including the service tax component.

As per the author’s opinion on clear reading of first mentioned circular the circular is applicable to whole chapter XVII B i.e. to all the sections under which TDS is liable to be deducted. Hence TDS is not required to be deducted on service tax component of bill w.e.f 13.01.2014 provided the Service tax component is separately mentioned in Invoice and payment is made to resident.

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