Applicable TDS Section and Rate for Water Testing Charges, Income Tax

[Ramanathan Seshan]

Dear Experts,

Can you please clarify which section and rate apply to water testing charges? Testing carried out by a private agency accredited by government.

Regards,
S Ram

Posts / Replies

[YAGAY andSUN]

Let’s address the TDS (Income Tax) applicability on water testing charges paid to a private agency accredited by the Government.

✅ TDS Applicability on Water Testing Charges

Water testing services are professional/technical services, and the TDS provisions under the Income Tax Act, 1961 apply accordingly.

📌 Applicable Section: Section 194J

Nature of Payment:

Water testing services fall under “fees for technical services” as defined in Explanation (b) to Section 194J.

📑 Details under Section 194J

Particulars	Details
Applicable Section	Section 194J – Fees for professional or technical services
Applicable Rate	10%
Threshold Limit	TDS to be deducted only if the annual payment to the party exceeds ₹50,000/-
Who should deduct	Any person (other than individual/HUF not liable for audit) making the payment
Time of deduction	At the time of credit to the party's account or actual payment, whichever is earlier
PAN Requirement	If the deductee (service provider) does not furnish PAN, TDS @ 20% is applicable

📘 Definition of “Technical Services”

As per Explanation (b) to Section 194J:

“Fees for technical services” means any consideration for rendering of any managerial, technical or consultancy services, including provision of services of technical or other personnel. Water testing clearly falls under this definition when performed by a scientific/technical agency.

🛑 Not Covered Under Section 194C

• Section 194C (contracts) generally covers works contracts or routine jobs.
• Since water testing involves technical skill and analysis, Section 194J is more appropriate.

✅ Summary Table

Service	TDS Section	TDS Rate	Threshold (per annum)	Remarks
Water Testing by Private Agency	194J	10%	₹50,000 (w.e.f. from 01-04-2025).	Applicable if payer is liable to deduct TDS and annual payment exceeds limit

[YAGAY andSUN]

GST Applicability on Water Testing Services by Private Laboratories

Here's a comprehensive explanation regarding the Goods and Services Tax (GST) applicability on water testing services provided by private laboratories accredited by the government:

1. Classification under GST

Water testing services provided by private laboratories accredited by the government typically fall under the SAC (Services Accounting Code) 998346, which pertains to:

Technical Testing and Analysis Services

This category encompasses services related to physical, chemical, biological, or any other scientific testing or analysis of various substances, excluding those related to human beings or animals.

2. GST Rate

As per the prevailing GST structure:

• GST Rate: 18%

This rate applies to technical testing and analysis services, including water testing conducted by private laboratories.

3. Input Tax Credit (ITC)

Since the water testing service is subject to an 18% GST rate, businesses availing of these services can claim an Input Tax Credit (ITC) on the GST paid, provided they meet the necessary conditions under the GST Act.

4. Exemptions

It's important to note that certain services may be exempt from GST. For instance:

• Government or Semi-Government Laboratories: If the water testing is conducted by government or semi-government laboratories, the services may be exempt from GST. However, this exemption does not extend to private laboratories.

5. Documentation and Compliance

To ensure proper compliance:

• Tax Invoice: The private laboratory should issue a tax invoice with a clear mention of the GST charged.
• GSTIN: Ensure that the laboratory is registered under GST and provides their GSTIN on the invoice.
• Payment Records: Maintain records of payments made for the services, as these will be necessary for claiming ITC.

Conclusion

Water testing services provided by private laboratories accredited by the government are subject to an 18% GST under SAC 998346. Businesses availing of these services can claim an Input Tax Credit (ITC), subject to the fulfilment of conditions specified under the GST Act. It's crucial to maintain proper documentation and ensure compliance with GST regulations to avail of the benefits.

[Ramanathan Seshan]

Dear Yagay-sir,

How do you classify this as a professional service. Please justify.

Regards,

S Ram