IS tax to be deducted at source on contract payment on the total value of the bill including the service tax part or on the net value excluding the service tax. Ex: Basic amount Rs.10000, Service Tax -1224 and gross value = Rs.11224. Whether tax to be deducted on Rs.11224 or on Rs.10000 ? Kindly clarify
The tax is required to be deducted at source on the gross amount of bill which is inclusive of service tax as per the clarification issued by the Department. CBDT in circular no. 715 has clarified that Section 194 C and 194 J refer to "any sum paid" and obviously reimbursement cannot be deducted out of bill amount for the purpose of TDS. Therefore, considering the above circular and the amount to be debited in books as expenditure, the tax has to be deducted on the entire amount of bill inclusive of service tax.
In view of the above, TDS has to be affected on Rs 11224 in your example