Running Bill Deductions Calculator

The calculator needs one value and a rate for each deduction your contract actually provides for. None of the rates are yours to assume, and every one of them is written down somewhere you already hold.

• The gross value of this bill comes from the measurement book: the cumulative value of work done to date at contract rates, less the cumulative value already billed.
• Retention or security deposit sits in the conditions of contract, as a percentage of each bill together with a ceiling expressed against contract value.
• Income tax TDS is deducted under section 194C of the Income-tax Act 1961. The rate turns on the status of the payee, and section 206AA applies a higher rate where PAN is not furnished, so take the rate from the deduction statement rather than from memory.
• GST TDS arises under section 51 of the CGST Act 2017, and only where the buyer is a notified deductor and the value of supply under the contract crosses the threshold that section sets. Plenty of bills carry none.
• Labour cess applies where the work attracts the Building and Other Construction Workers Welfare Cess Act 1996.

Then the contractual recoveries: the mobilisation or secured advance instalment, royalty or seigniorage where the contract recovers it, departmental water, power and plant hire charges, and liquidated damages where they have been assessed. Running account bills sets out where each of these appears in the bill.

This is where most wrong answers come from. Four deductions can sit on three different bases, and applying all of them to a single number gives a net that is wrong on every bill.

Retention is normally taken on the value of work done at contract rates in this bill, before tax, unless your conditions say otherwise. The percentage applies per bill; the ceiling applies cumulatively.

Income tax TDS is deducted on the amount paid or credited. Where the GST component is indicated separately in the invoice, Circular No. 23/2017 issued by the Central Board of Direct Taxes addresses deduction of tax on the amount excluding that GST component.

GST TDS under section 51 is computed on the taxable value of the supply, which by definition excludes the GST itself.

Labour cess is levied on the cost of construction as the Cess Act and the rules define it. That is not the invoice total including tax, and it excludes the cost of land.

So the GST-inclusive invoice total is rarely the base for anything. Enter the pre-tax value of work done, keep GST as its own line, and let each deduction take the base it is entitled to.

You can do this on paper in eight steps.

1. Gross value of this bill = cumulative value of measured work to date at contract rates, minus the cumulative value certified in earlier bills.
2. Add GST as the contract provides. Whether the price is inclusive or exclusive is set by the tender, and it changes the invoice total, not the deduction bases.
3. Retention = retention percentage times the gross value of work in this bill, stopped once cumulative retention reaches the contract ceiling.
4. Income tax TDS = the applicable rate times the value excluding GST.
5. GST TDS = the applicable rate times the taxable value, and only where the buyer is a deductor.
6. Labour cess = the notified rate times the cost of construction as defined, where the work attracts the Act.
7. Other recoveries: advance instalment, royalty, departmental charges, liquidated damages where assessed.
8. Net payable = invoice total less every line above.

Then sort the total deducted into three buckets, because they are not the same kind of money. Retention comes back on request after the defect liability period. Income tax TDS and GST TDS are creditable, so they are a timing cost you finance. Labour cess and liquidated damages are gone. Advance recovery is neither a cost nor a credit; it is repayment of cash you already received.

Entering the cumulative figure as this bill. A running account bill is a cumulative document. The payable amount is the difference between the up to date figure and the previous bill, and typing the up to date figure into the gross field inflates every deduction at once.

Using the GST-inclusive total as the base. It is the base for none of the four main deductions, as above.

Ignoring the retention ceiling. Contracts cap cumulative retention. A spreadsheet that keeps deducting a flat percentage on every bill sails past the cap, and so occasionally does a department. Track retention cumulatively, not per bill.

Assuming GST TDS applies. It depends on the buyer being a notified deductor under section 51 of the CGST Act 2017 and on the contract crossing the threshold. Assuming it where it does not apply understates your net by a large figure.

Treating labour cess as recoverable. It is a cost of doing the work. Nothing comes back.

Counting advance recovery as a loss. You had that cash earlier. Recovery restores the position; it does not reduce your earnings.

Using a TDS rate from another contract. Rates turn on the payee's status and on whether PAN is on record.

It does not tell you when you will be paid. The net is what should be released once the bill is passed. Timing is governed by measurement, technical check and accounts, which is a separate problem with a separate remedy. See running account bills and, where a passed bill is not being paid, the escalation path.

It does not tell you your margin. The gross is revenue at contract rates, not profit, and the GST on the invoice is money you collect and remit rather than earn.

It does not tell you the credit you will actually get. Income tax TDS becomes a credit only once the deductor has deposited and correctly reported it against your PAN. GST TDS reaches your electronic cash ledger only once you accept it on the portal. Deductions that are never reconciled are a straight loss. TDS, GST TDS and labour cess covers the reconciliation routine.

It does not tell you the full capital cost of the contract. Retention sits through the defect liability period, and a performance guarantee sits alongside it with commission and margin money attached. Price those separately with the bank guarantee cost calculator.

Errors do occur, and they are correctable when raised against the bill in question rather than years later at contract close.

1. The base. Was the deduction taken on the GST-inclusive total when the contract or the instrument points at the pre-tax value?
2. The rate. Compare against the clause for retention, and against the deduction statement for TDS. A rate carried over from an earlier contract is a common cause.
3. The ceiling. Add up retention deducted to date across all bills and compare it against the cap in the conditions.
4. Double recovery. Mobilisation and secured advances get recovered twice more often than anyone expects, particularly after a change of billing clerk. Keep a running balance of the advance.
5. The arithmetic on cumulative quantities. Check the up to date figure and the previous bill figure against the measurement book.

Raise it in writing, quoting the bill number and the clause, while the bill is still in the system. Where tax has been deducted but never appears in your tax credit statement, that is a different problem, taken up with the deductor within the quarter. Retention money covers getting the held amounts released at the end.

Once you have run a bill through this, the pricing consequence is straightforward, and it is where most of the money is.

Non-creditable deductions belong in the rate. Labour cess, where the work attracts it, is a cost line in the build-up like any other. A rate that omits it under-recovers on every bill for the life of the contract.

Creditable deductions belong in the cash flow. Income tax TDS and GST TDS cost you nothing in the profit and loss account and a real amount in financing. Cost them as the amount deducted, times your cost of capital, times the months until set-off.

Retention belongs in both conversations. It is your money, and it is held from the first bill until after the defect liability period, which on a two-year contract with a twelve-month defect liability period is a long time to fund.

Add the earnest money and the guarantee margin sitting behind the same contract, and you have the financing load a public works job actually carries. See how to price a government tender, and set your walk-away number before an auction with the reverse auction floor price calculator.