Navigating Service Tax and TDS: How Should My Company Handle These Deductions?

Dear seniors,

I am newly joined with a manpower company in Chennai. (I am a learner in my company).

My agency is billing X Company for the manpower provided to them. In the invoice value, we are adding 10% as Service Tax + 2% education cess on ST, + 1% on Higher Education Cess.

The client has paid us against the invoice. They deducted 2% as TDS and paid us the remaining value of the invoice.

My query:
Does my company need to pay the service tax to the government? (This was billed to the client).

From the client's side, how will they get reimbursed for the Tax paid amount?

What will they do with the 2% TDS deducted from the invoice value?

Need your guidance.

Thank you,
Senthilkumaran

They will give you a TDS certificate for the TDS deducted at the financial year-end, after which you can file returns to claim it. They will submit the TDS deducted in the Income tax as per the rules. Please let me know if you need any further assistance.

Dear Senthilkumaran,

Service Tax: You need to register with the Service Tax Department as a Manpower Agency. Since you are charging Service Tax on your bill, you must deposit it with the Government treasury as soon as you receive payment. You also need to file a half-yearly return with the Service Tax Department.

TDS: The company has the right to deduct TDS from your bill. At the end of the quarter/year, the company will issue Form No. 16A (TDS Certificate) to you. When filing your income tax return, you can claim this TDS credit against your income tax liabilities, or you can claim a refund in case of nil tax liabilities.

Thanks,
Jignesh

Thank you very much for your guidance. I heard that the service tax paid by the client against my invoice can be reimbursed from the government. Is it true?

With regards,
Senthilkumaran

Thank you very much for the guidance. I heard that the service tax paid by the client against my invoice; the ST value can be reimbursed by the client from the government. Is it true? If it is true, what are the formalities to be followed?

With regards,
Senthilkumaran

Dear,

Service Tax will not be reimbursed. The collector has to deposit it with the government. Similarly, the Client who has deducted TDS has to deposit it. These are issues for your/their Finance Department. Please refer it to them.

With Regards,

Advocates & Notaries Legal Consultants [HR]

E-mail: rajanassociates@eth.net

Mobile: 9025792684.

Dear Senthilkumaran,

First of all, if you are adding service tax to your invoice, you must have a service tax registration number, and you have to pay the service tax to the government on a quarterly basis with the attached format. Now, suppose you have collected Rs. 100 as service tax from your client, and you are also receiving services from your vendors, such as AMC, etc., and the vendor has also added ST on their invoice, with the amount being Rs. 40. In this case, you can take an ST credit of Rs. 40, and you will have to pay Rs. 60.

TDS certificates are related to income tax returns. You can claim a tax rebate on income tax by showing the TDS certificate.

Sarkar.

If X company has made full payment and has only deducted TDS, you have to pay the full service tax as the deduction made by X is in the nature of your tax liability, which has been shifted to them by way of deduction for the same. You have received the full value of the invoice because otherwise, Income Tax (more than the extent of TDS deducted by X) was payable by you later on. So there is no issue relating to service tax. You have to deposit what was correctly shown on your invoice to X.

Service Tax is chargeable on the services which are covered under Service Tax. The Service Tax is adjustable. The Service Tax one pays for availing the services of the third party can be adjusted (set off) against the service tax collected (and required to be deposited by your company with the government) on the services rendered by your company. You deposit the net service tax with the government in a Return form in which you have to show details of Service tax Collected and Service Tax paid.

TDS is the (Income) Tax Deducted at Source. This is the responsibility of the person making payment to your company to deduct the TDS and deposit it with the Government on your behalf. You must furnish your PAN No. to the person who is deducting TDS from your bills so that the correct credit is made to your company by the tax authorities. The person who deducts the tax issues a Certificate (Form 16) to enable you to claim the same from the government. Otherwise, your tax credit will be lost. Your Company can claim the benefit of TDS towards adjustment of Income Tax payable by your company, or if no Income Tax is payable by your company, your company can claim a refund from the Income Tax Department.

Further, the person who deducts the tax (TDS) issues a Certificate (Form 16) to enable you to claim the same from the government. Otherwise, your tax credit will be lost.

Your company can claim the benefit of TDS towards adjustment of Income Tax payable by your company. If no Income Tax is payable by your company, your company can claim a refund from the Income Tax Department.

1. I would like to add that the consultant is liable to get registered for service tax in case his turnover is above 10 lakh in a year for the purpose of charging the Service Tax. Service Tax charged is not the income of the party charging the tax but the same has to be deposited with tax authorities.

2. One can ask for TDS certificate (Form 16A) without waiting for the end of the year in case it is only a one-off transaction in a financial year.

3. One can also check the amount deducted towards TDS on the income tax website, after the other party has filed the return.

I think they cannot deduct TDS on the ST portion. They can deduct TDS on the invoice value, which includes the service tax amount.

Thank you.

I am Prakash. I recently joined the NGO sector and am currently working as an HR Executive. My net salary is 16589.47, Gross 18343.85, Conveyance 800, HRA 2923, Basic 14619. I started receiving this salary from February onwards. Recently, I noticed some tax deductions amounting to 7204 for two months (August and September). I am very confused about my tax deductions and how the company deducts such a significant amount from my salary. We do not have any professional taxes. Can you help me?

Dear Fear Naga Parkash,

Your Gross Annual Salary works out to Rs. 232126.00. So, in the current financial year, income up to Rs. 160,000 is exempted. On the rest, there is a tax rate of 10%. Therefore, they have deducted 10% of Rs. 72,126, i.e., Rs. 7,212.00. You can still save on this tax by investing in tax-saving schemes. If your company has not yet deposited the tax, you may request them not to do so by providing proof of the investment in tax-saving schemes. Otherwise, you can claim a refund by filing the return. The Provident Fund deducted from your salary is also a tax-saving instrument, and the company should consider that before deducting tax at source.

Dear R Bhalan,

The TDS is calculated on the total payment to be made, not on the part excluding service tax. TDS represents your tax, and if it is not payable, you can seek a refund of the same by filing your Income Tax Return (ITR).

Hi,

I want to acquire a comprehensive understanding of working with service tax in a company. I currently work in the accounting department but lack knowledge in this area. I am seeking guidance on how to handle tasks such as Income tax, Service Tax/VAT Returns filing, filing E-TDS Returns, and other related service taxation responsibilities in the accounts department.

Please feel free to reach out to me at [Login to view] for any further assistance or information.

Thank you.

Dear Naga,

As you mentioned, your gross salary for this financial year will be Rs. 220,116 (18343*12). Up to Rs. 160,000, the tax rate is NIL, and above that, and up to Rs. 500,000, it is 10%. So in your case, it should be 10% of Rs. 60,116 (220,116 - 160,000), i.e., Rs. 6,012/-. But here your company has deducted more than this amount. Also, they should deduct it on an average monthly basis, i.e., Rs. 602 per month (6012/12).

You should clear this matter with your accounts department. Also, as suggested in the forum by someone, I guess smbhappy, you can even save this tax by making some investment. Or you can get a refund later when you file your income tax return.

In case you have more queries, you can post them here on citehr, and you will receive a satisfactory and well-discussed answer always.

Have a good learning!

Regards,
Singh S

Dear Madhuri,

You have chosen a good forum, and I hope you continue to learn from here at citehr. As you mentioned, you have no knowledge of accounting (maybe you are not from an accounting background). You need to understand that there are thousands of people working in the accounts department who do not have an accounting background. First and foremost, you must have passion and determination for learning accounting. Then, you can start with the help of your seniors in your company, as it is difficult to explain what kind of work is done in your department. You may have to prepare vouchers only or do bank reconciliations and make payments, as these are basic tasks for an accountant. Then, you can progress further to learn more.

Always post your queries here on this forum. Soon enough, you will become a good accountant.

Best of luck.

Regards,
Singh S.

Service tax needs to be paid only on those bills where payment has been received by us from the customer. Service tax is to be paid by the 7th of every month. Please clarify.

[QUOTE=[I]G.R.Paulson[/I];1302899]

Service tax needs to be paid only on those bills where payment has been received by us from the customer. Service tax is to be paid by the 7th of every month. Please clarify.

Service Tax is payable on the services rendered by your company to customers. Service Tax is payable whether you collect the same from the customer or not. It may be included in the service charges fixed by the company or the company may charge it separately. Service Tax is payable in the manner as defined under Chapter V of the Finance Act, 1994 dedicated to Service Tax.

For more information on service tax, you may visit: service tax

The service tax is paid online nowadays.