By CA Surekha Ahuja
Legal & Compliance Guide for FY 2025–26 & FY 2026–27
Where a hotel, banquet operator, caterer or event management company raises a composite invoice including:
- Accommodation
- Banquet charges
- Catering / food
- Event execution services
- Liquor supply
the liquor component is not liable for TDS under Section 194C.
TDS under Section 194C applies only on the non-liquor portion of the invoice.
Statutory Basis — Section 194C
Section 194C(1) applies to payments made to a contractor for carrying out any “work”.
Threshold Limits
| Particulars | Limit |
|---|---|
| Single payment | ₹50,000 |
| Annual aggregate | ₹1,00,000 |
TDS Rates
| Payee Category | Rate |
|---|---|
| Individual / HUF | 1% |
| Others | 2% |
Most Critical Provision — Explanation (iii) to Section 194C
Explanation (iii) includes within “work”:
- Catering
- Advertising
- Broadcasting
- Carriage contracts
- Manufacturing/supply as per customer specification
However, the Legislature specifically excludes:
“manufacturing or supply of liquor”
from the scope of “work”.
Legal Impact of the Exclusion
The exclusion is statutory and unconditional.
Therefore:
| Component | TDS u/s 194C |
|---|---|
| Banquet/event services | Applicable |
| Catering/food | Applicable |
| Staffing & coordination | Applicable |
| Liquor supply | Not Applicable |
Why Composite Invoicing Does Not Change the Position
Composite billing cannot override statutory exclusion because:
- Section 194C applies only to “work”.
- Liquor supply is expressly excluded from “work”.
- Charging provisions must be interpreted strictly.
- Invoice structure cannot expand the scope of the law.
Thus, liquor value remains outside the TDS base even in bundled contracts.
Applicability Across Hospitality & Event Industry
| Scenario | Liquor Excludible? |
|---|---|
| Event management contracts | Yes |
| Hotel banquet invoices | Yes |
| Corporate conferences | Yes |
| Wedding packages | Yes |
| Event company paying hotel | Yes |
| Separate liquor invoice | Completely outside 194C |
Correct TDS Computation
Composite Invoice Example — ₹25,00,000
| Particulars | Amount | TDS Applicability |
|---|---|---|
| Accommodation & banquet | ₹12,00,000 | Yes |
| Food & catering | ₹8,00,000 | Yes |
| Liquor supply | ₹5,00,000 | No |
| TDS Base | ₹20,00,000 | |
| TDS @2% | ₹40,000 |
CBDT Circular No. 13/2006 — Correct Reading
CBDT clarified that execution contracts and labour supply fall under Section 194C.
However, the Circular does not override the statutory exclusion relating to liquor supply.
Accordingly:
| Nature of Payment | Position |
|---|---|
| Event execution services | Covered |
| Catering services | Covered |
| Liquor product value | Specifically excluded |
Important Distinction — Product vs Service
| Component | TDS Position |
|---|---|
| Liquor product cost | No TDS |
| Bartender/service charges | TDS applicable |
| Event staffing | TDS applicable |
| Bar setup/management services | TDS applicable |
The exclusion applies only to liquor supplied as product and not to independent service components.
Compliance Framework
Step 1 — Identify Liquor Component
Where separately disclosed:
- adopt actual value.
Where composite billing exists:
-
prepare reasonable bifurcation based on:
- package structure,
- guest count,
- menu composition,
- industry standards.
Step 2 — Maintain Documentation
- Vendor invoices
- Quotations/package details
- Internal working sheets
- Event agreements
- Menu/liquor details
Step 3 — Deduct TDS Only on Eligible Portion
Computation Principle
Important Practical Clarifications
| Issue | Position |
|---|---|
| Separate liquor invoice mandatory? | No |
| Estimated bifurcation allowed? | Yes, if reasonable |
| GST impacts exclusion? | No |
| Small liquor value ignored? | No |
| Form 26Q reporting | Report taxable portion |
Final Legal Position
On a combined reading of:
- Section 194C(1),
- Explanation (iii) to Section 194C,
- the statutory exclusion relating to liquor supply,
- and settled principles of strict interpretation of TDS provisions,
the legally sustainable position is:
the liquor component embedded in composite hotel, banquet, catering or event management invoices does not form part of the amount liable for TDS under Section 194C.
Accordingly:
- TDS is deductible only on the non-liquor component;
- composite invoicing does not nullify statutory exclusion;
- and reasonable bifurcation with documentation should be maintained
