When to deduct TDS on JOB WORK?

All of us are now familiar with the amendments in Section 194C & amendment through Finance Act(2) ,2009.New Section 194C has been substituted for old section 194C .New Section is applicable from the 01.10.2009. We had already given amendments regarding rates. But there is always some sort of confusion regarding Deductibility of TDS …………… as Whether TDS is deductable or not? And on What amount?

We herewith clarify the new provision with the example.

No TDS has to be deducted in case of payment of Job work, if raw material has not been supplied by the payer.

TDS in case of JOB work according to specification (brief):

In case of work contract being manufacturing or supplying product according to specification (by using material from such customer), TDS shall be deducted on the invoice value excluding the value of material purchased from such customer, if such value is mentioned separately in the invoice.

Where the material component has not been mentioned specifically than TDS is applicable on total bill amount.

Example:1:

Ishika Sarees has issued purchase cum work order of boxes according to company specification for packing of sarees to ABC Ltd. ABC ltd purchased the required raw material from market to manufacture such boxes and supplied the boxes to Ishika Saree company. In above situation Ishika Saree company is not liable to deduct TDS on payment to ABC company .As per note (iv) to explanation of section 194C ,contract to manufacture the product according to customer specification, but where material is not supplied by the customer, is not covered under work contract definition as per section 194 C .

Example :2

Suppose in above contract Ishika Saree has supplied all the raw material to ABC LTD for 100000/- Rs and total contract value of contract is 200000/- Rs. (a) ABC billed Ishika Sarees for 2 lakh and in invoice material value has been shown as one lakh. (b) ABC Ltd ,billed Ishika Sarees for 2 lakh and no detail has been mentioned about the material. In case (a) above Ishika Sarees is required to deduct tax on one lakh rupees. (gross bill minus material value)(as per subsection (3) section 194C) In Case (b) above Ishika Sarees co is required to deduct tax on Two lakh rupees (Gross bill, as nothing mentioned about material cost)(as per subsection (3) section 194C) Amendments in section 194C from 01.10.2009: