Hi All ,

I have query for my client.

" The company gives parties to its dealers and other employess for achievements of targets, for this purpose the company fixes with the hotel say  Rs x per plate for y no of people . The party takes place in the hotel premises and the hotel while raising the bills sometimes charges service tax on the whole bill amount and also VAT in some cases." 

Whether the company is liable to deduct TDS on the same 

Please give me concrete replies for the same

According to your statement the party was organised in the premises of the hotel, and the space given by the hotel is for your utility for a particular time frame,The space is covered under mandap keeper services in service tax act, service tax will be liable on your bills for using the banquet space. Whereas vat has been charged incase of food & beverages as per the specified rates of Sales Tax act. And as a result  the hotel bills sums up including vat & service tax. Since a package was given to you on the basis of per plate instead of ala carte, you are liable to deduct tds on the same bill & remit the balance amount.

My answere is with rspect to TDS only,

prima facie it seems to be a Contract. As per sec 194C of the income tax Act, any person responsible for paying any sum to a resident contractor for carrying out any work in connnection with a contract including sub Contract, shall deduct tax at source at the time of payment or credit whichever is earlier.

Threshold limit for deduction:

1) amount of any single sum paid or credited to the contractor exceeds Rs. 20000 or

2) total amount of such sums paid or credited to the contractor during the financial year exceeds Rs.50000.

hence, the company is liable to deduct TDS @ 1% or 2% if the payee is individual and HUF or other than individual and HUF as the case may be.

Service tax and VAT is applicable in the hands of the hotel business.

Thank you!