TDS to be caculated only on Basic+VAT not on Service Tax

Dear All,

This is as per new circular 01/2014 dated 13.01.14 issued by Central Board of Direct Taxes, India to get exemption on TDS on service Tax.

NO TDS ON SERVICE TAX IF SHOWN SEPARATELY UNDER ALL SECTION ON PAYMENT TO RESIDENT .

Hence TDS is to be calculated on the Basic Amount + VAT (if applicable - In case of Work Contract Tax) and not on the Gross Amount.

OR TDS is to be calculated only on the Basic Amount (if VAT is not applicable).

Service Tax component  is to be excluded from TDS calculation.

Now  in such scenario, as per Witholding Tax Type setting - which option (radio button) is to be selected for Base amount to calculate TDS that will comprise of Basic + VAT amount?

As per our current setting, we have setting for Base Amount as 'Gross Amount' and hence TDS is getting calculated on Gross amount i.e. (Basic + VAT + Service Tax).

Requesting all to suggest how to proceed in this regard.

Thanks and Regards

Ratna