Whether payment made to transporters is exempt u/s 194C, if PAN is furnished, Income Tax

[DEV KUMAR KOTHARI]

194C- exemption on furnishing of PAN is only to payment made to contractor in course of specified business and not in all cases. It seems that there is large scale confusion by which it is considered that any payment made to transporters is exempt if PAN is furnished. This is not so clear, it appears that exemption is only for persons engaged in business of plying, hiring or leasing goods carriages The relevant portions of Section 194C reads as follows: (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. For any general business person (other than those engaged in specified business of plying....) ,in view of controversy, it is advisable to deduct tax from payments made to GTA / transporters and deposit it. Tax deductible upto February must be deposited before March, otherwise the relevant sum shall be disallowed in PYE 31.03.xxx and allowed only in the year in which TDS is deposited. For Tax deductible and actually deducted during March the due date may be 7th April/ 31 May, however the relevant sum can be allowed even if TDS is deposited before due date to afile return of income u/s 139.1 On reading of memorandum exp[laining amendment also it appears that exemption is available to vehicle operator who move from one place to other and find dificult to get TDS certificate. Therefore, itis advisable to deduct tax where applicable from payments made to GTA and other transporters when payment is not in course of business of plying, hiring , leasing of GCV. Readers views are welcome.

Posts / Replies

[Rama Krishana]

Yes, a careful approach is required since deciding the nature of service and application of exemption always remains controversial.

[Siva Swamy]

Sub-section specifies "(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring, or leasing goods carriages, on furnishing of his Permanent Account Number,  to the person paying or crediting such sum."  It may be observed that comma is used after the words 'Permanent Account Number'.  After the comma, it says 'to the person paying or crediting such sum'. That is the specifications 'during the course of business . . . . . . .' should be applicable only for contractor. Thus, in my view, the person paying to a contractor who is in business of plying etc, is not required to deduct TDS provided the latter submits his PAN.  Contrary views are welcome. 

[Sandeep Aggarwal]

Dear Sir,

I still have a question relating to above exemption.

Would we need to deduct tds on ancilliary and incidental services provided by the GTA used in relation to trasportion of goods. For expample, if he charges loading & unloading expenses in addtion to frieght on the invoice which is part of GTA contract to transportation of goods.

for your reference:-

As per Service Tax Circular No 104 /2008: GTA provides a service in relation to transportation of goods by road which is a single composite service. GTA also issues consignment note. The composite service may include various intermediate and ancillary services provided in relation to the principal service of the road transport of goods. Such intermediate and ancillary services may include services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., which are provided in the course of transportation by road. These services are not provided as independent activities but are the means for successful provision of the principal service, namely, the transportation of goods by road. The contention that a single composite service should not be broken into its components and classified as separate services is a well-accepted principle of classification. As clarified earlier vide F.No. 334/4/2006-TRU dated 28.2.2006 (para 3.2 and 3.3) and F.No. 334/1/2008-TRU dated 29.2.2008 (para 3.2 and 3.3), a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified.

In case transporter is furnishing the PAN, the payment for GTA charges including loading & unloading charges should not be liable to TDS.

Please clarify the same.