Monday, August 27, 2012

SERVICE TAX ON WORKS CONTRACT VALUATION REVERSE CHARGE


on Monday, August 27, 2012

In this post we are discussing provision related to Service Tax on works contract after 01.07.2012 mainly under following heads
  1. Meaning of works Contract.
  2. Valuation Method including abatement % / prescribed % valuation  of  works Contract.
  3. Provision of Reverse Charge applicable on Works contract 

With effect from 01-07-2012 works contract are covered under “Declared Services” under Section 66E of the Act:



Meaning of Works Contract w e f 01.07.2012

Works Contract has been defined under section 65B(54)
works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance. renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;
The above definition is exhaustive as it starts with Works contract "means".But last line of definition extend the scope to many similar activities.Major change in service tax on Works contract from 01.07.2012 is that now movable property is also covered under works contracts.Main features of new definition is 
  • Transfer of property in goods involved in the execution of such contract :First  part of the definition is that there must be transfer of property in goods in the contract while executing the contract.If no transfer of property is involved then it is not covered under works contract. 
Contract with consumables are not works contract:service provider is providing consumables like oiling and lubricating the machinery then it is not covered in works contract as property of goods is not transferred but goods are consumed .

Pure Labor contract are not works contract.

  • Transfer of Property in good is leviable to tax as sale of goods : Second important part is that Transfer of property in goods is taxable under sales tax. If such transfer is not taxable under sales tax then contract is not covered under works contract.
  • such contract is for the purpose of carrying out 
    1. construction, 
    2. erection,
    3. commissioning, 
    4. installation, 
    5. completion, 
    6. fitting out, 
    7. repair, 
    8. maintenance. 
    9. renovation, 
    10. alteration 
  • of Any movable or immovable property : Now works  contract covers movable property also.Like repair of vehicle , Movable machinery is also covered under works contract if material property of goods gets transferred while executing repair contract.
  • any other similar activity or a part thereof in relation to such property : This part extend the nature of activity other than 10 activities given above and prone to litigation.
Will the goods portion in transactions like annual maintenance contracts or erection and commissioning or construction be includible in the value of services  ?

All the examples given in the question now comprise “works contracts” and only the service portion of such contracts comprise service. By the express provisions contained in the definition of service (which is mandated by constitutional provisions) it is not possible to tax the goods portion of works contracts. However the principles of segregation of the value of goods are provided in Rule 2A of the Valuation Rules. Thus there is no basis for the taxation of goods in such contracts even after the deletion of the stated notification.

Even for the sale of any equipment for which a separate contract for warranty or after sales services or maintenance is entered the discernible sales portion is not to be included in the discernible portion of the value of service. For all practical purposes these will be two separate contracts. However for artificial segregation of value between goods and services, to save either of the taxes on goods or services, the benefit was neither available earlier under the stated notification and the position continues to be the same under the new regime.

Would contracts for repair or maintenance of motor vehicles be treated as ‘works contracts’? If so, how would the value be determined for ascertaining the value portion of service involved in execution of such a works contract?

Yes. Contracts for repair or maintenance of moveable properties are also works contracts if property in goods is transferred in the course of execution of such a contract. Service tax has to be paid in the service portion of such a contract.

Would contracts for construction of a pipe line or conduit be covered under works contract?
Yes. As pipeline or conduits are structures on land contracts for construction of such structure
would be covered under works contract.


Would contracts for erection commissioning or installation of plant, machinery, equipment or structures, whether prefabricated or otherwise, be treated as a works
contract?

Such contracts would be treated as works contracts if transfer of property in goods is involved in such a contract.

Would contracts for painting of a building, repair of a building, renovation of a building, wall tiling, flooring be covered under ‘works contract’?

Yes, if such contracts involve provision of materials as well.

Exemption to sub contractor in work ccontract  if main contract service are exempted : sub-contractor providing services by way of works contract to the main contractor, providing exempt works contract services, has been exempted from service tax under the mega exemption if the main contractor is engaged in providing exempt services of works contracts. It may be noted that the exemption is available to sub-contractors engaged in works contracts and not to other outsourced services such as architect or consultants.



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Valuation of Services in works Contract wef 01.07.2012

As compared to the old schemes for valuation of works contract services (up to 30.06.2012) one under the rule 2A of the Valuation Rules and second under the Works Contract (Composition Scheme for Payment of Service Tax) Rules 2007 has been replaced with a unified scheme under the new rule 2A of Service Tax (Determination of Value) Rules, 2006.

Substituted Rule 2A(i) of Service Tax (Determination of Value) Rules, 2006, inter alia, provides the rules to value service portion in the execution of a works contract.Main two option are available under valuation.In our view both these scheme of valuation are option available to assesses.


1 Pay service tax on Value of services after deducting value of goods from the gross value.

2 Pay service tax at composite rate
  • In case of original work, pay service tax on 40% value, 
  • In case of maintenance or repair or reconditioning or restoration or servicing of any goods, pay service tax on 70% value, 
  • In case of all other works contract, pay service tax on 60% value
Service provider is also eligible to avail CENVAT Credit of input services and capital goods.

 Pay service tax on Value of services after deducting value of goods from the gross value:

gross amount charged for the works contract less the value of property in goods transferred
  • In the cases where VAT has been paid on ACTUAL value of transfer of property in goods, then this value will considered while calculating the value of Works Contract.
  • If the VAT is not paid on the ACTUAL value, the assessee will calculate the same for the purpose for service tax and it will be deductible from the gross value.

(i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract.

Explanation.- For the purposes of this clause,-

(a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the execution of the said works contract;

(b) value of works contract service shall include, -

(i) labour charges for execution of the works;
(ii) amount paid to a sub-contractor for labour and services;
(iii) charges for planning, designing and architect’s fees;
(iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works Contract;
(v) cost of consumables such as water, electricity, fuel used in the execution of the works contract;
(vi) cost of establishment of the contractor relatable to supply of labour and services;
(vii) other similar expenses relatable to supply of labour and services; and
(viii) profit earned by the service provider relatable to supply of labour and services;

(c) Where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then, such value adopted for the purposes of payment of value added tax or sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract for determination of the value of service portion in the execution of works contract under this clause.

2. Pay service tax at composite rate

In our view First and second (1) and (2) shown in this post is optional and to opt option B ,A part must not be ruled out first.In second option wording has been used as "Where the value has not been determined under clause (i)" instead of "Can not be determined "

(ii) Where the value has not been determined under clause (i), the person liable to pay tax on the service portion involved in the execution of the works contract shall determine the service tax payable in the following manner, namely:-



(A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent. of the total amount charged for the works contract;


Explanation 1.- For the purposes of this rule,-
(a) “original works” means-
(i) all new constructions;
(ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;
(iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;


(B) in case of works contract entered into for maintenance or repair or reconditioning or restoration or servicing of any goods, service tax shall be payable on seventy percent. of the total amount charged for the works contract;


70% is applicable on Movable property 

Section 65B(25) "goods" means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;

(C) in case of other works contracts, not covered under sub-clauses (A) and (B), including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property , service tax shall be payable on sixty per cent. of the total amount charged for the works contract;


(d) “total amount” means the sum total of the gross amount charged for the works contract and the fair market value of all goods and services supplied in or in relation to the execution of the works contract, whether or not supplied under the same contract or any other contract, after deducting-

(i) the amount charged for such goods or services, if any; and
(ii) the value added tax or sales tax, if any, levied thereon:

Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.


Explanation 2.--For the removal of doubts, it is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004.”.

Cenvat Credit :The Provider of taxable service could not take CENVAT credit of duties/cess paid on any inputs used in or in relation to the said works contract. However, credit in respect of taxes paid on capital goods and input services shall be available


Can the manner of determination of ‘total amount charged’ be explained by way of a suitable example?


The manner of arriving at the ‘total amount charged’ is explained with the help of the following example pertaining to works contract for execution of ‘original works’.

1 Gross amount received excluding taxes =95,00,000
2 Fair market value of goods supplied by the service receiver excluding taxes =10,00,000
3 Amount charged by service receiver for 2= 5,00,000
4 Total amount charged (1+2-3) =1,00,00,000
5 Value of service portion(40% of 4 in case of original works) 40,00,000

Note: When the service provider pays partially for the materials supplied by the service receiver, gross amount charged would inevitably go higher by that much amount.
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Reverse Charge applicable on Works contract wef 01.07.2012 

The reverse charge method is extended to the works contract services to the extent of 50%(partial reverse charge). Thus, 50% service tax is payable by the recipient and the remaining by the provider of works contract service.The condition under reverse charges are 
  1. Service receiver must be a body corporate and 
  2. Service provider must be 
    • Individual,
    • HUF,
    • Partnership firm (registered or unregistered ) ,
    • AOP. 
  3. Both service Provider and service receiver must be located  in taxable territory. 
If above Conditions are not fulfilled then reverse charge is not applicable.Means if service provider is other then four categories given above then reverse charge is not applicable. Further service receiver must be Body corporate.


Thus the nature of the service(works contract) and the status of both the service provider and service receiver are important to determine the applicability of partial reverse charge provisions.

Further as per explanation II given in notification 30/2012 dated 30.06.2012 in works contract services, where both service provider and service recipient is the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service.

What does a service provider need to indicate on the invoice when he is liable to pay only a part of the liability under the partial reverse charge mechanism?

The service provider shall issue an invoice complying with Rule 4A of the Service Tax Rules 1994. Thus the invoice shall indicate the name, address and the registration number of the service provider; the name and address of the person receiving taxable service; the description and value of taxable service provided or agreed to be provided; and the service tax payable thereon. As per clause (iv) of sub-rule (1) of the said rule 4A ‘’the service tax payable thereon’ has to be indicated. The service tax payable would include service tax payable by the service provider.

If the service provider is exempted being a SSI (turnover less than Rs 10 lakhs), how will the reverse charge mechanism work?

The liability of the service provider and service recipient are different and independent of each other. Thus in case the service provider is availing exemption owing to turnover being less than Rs 10 lakhs, he shall not be obliged to pay any tax. However, the service recipient shall have to pay service tax which he is obliged to pay under the partial reverse charge mechanism.

Will the credit of such tax paid be available to the service recipient?

Normally, the credit of the entire tax paid on the service received by the service receiver would be available to the service recipient subject to the provisions of the CENVAT Credit Rules 2004. The credit of tax paid by the service provider would be available on the basis of the invoice subject to the conditions specified in the CENVAT Credit Rules 2004. The credit of tax paid by the service recipient under partial reverse charge would be available on the basis on the tax payment challan, again subject to conditions specified in the said Rules.

What shall be the point of taxation for the service recipient? When will he need to pay the service tax in respect of his liability?

Both the service provider and service recipient are governed by the Point of Taxation Rules 2011 in respect of the service provided or received by him. Usually it is the invoice or date of receipt of payment which is the point of taxation for the service provider. However for the service recipient, in terms of rule 7 of the said rules, point of taxation is when he pays for the service. Thus in the case where the invoice is issued in say July 2012 and the service recipient pays for the same in August 2012 the point of taxation for the service provider will be the date of issue of invoice in July 2012. The point of taxation for the service recipient shall be the date of payment in August 2012. The service provider would be required to pay tax (to the extent liability is affixed on him) by 5th /6th August, 2012 or 5th /6October 2012 depending upon the admissibility of benefit under the proviso to rule 6 of the Service Tax Rules 1994. The service recipient would need to pay tax (to the extent liability is affixed on him) by 5th/6th September 2012.

How will the service recipient know which abatement or valuation option has been exercised by the service provider?

The service recipient would need to discharge liability only on the payments made by him. Thus the assessable value would be calculated on such payments done (Free of Cost material supplied and out of pocket expenses reimbursed or incurred on behalf of the service provider need to be included in the assessable value in terms of Valuation Rules). The invoice raised by the service provider would normally indicate the abatement taken or method of valuation used for arriving at the taxable value. However since the liability of the service provider and service recipient are different and independent of each other, the service recipient can independently avail or forgo an abatement or choose a valuation option depending upon the 
ease, data available and economics. 

Is the reverse charge applicable on services provided and complete before 1.7.2012 though payments were made after 1.7.2012? 

For any service whose point of taxation has been determined and whole liability affixed before 1.7.2012 the new provisions will not apply. Merely because payments are being made after 1.7.2012 will not add any additional liability on the service receiver in respect of such services. 

Can Tax liability under reverse charge Mechanism be settled with use of Cenvat Credit by service receiver ?

No, Cenvat credit can be used fro output services only. Service tax payable under reverse charge is related to input services.so Service receiver have to deposit this service tax by Cash/challan only. However such deposited amount is available for Cenvat credit to service receiver on the basis of challan.

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  1. i want to know about income tax u/s 269SS & 269T. Please post full article on these sections.

    ReplyDelete
  2. Will Pest control service undertaken to be given for 1 year period for any flat / office come under works contract. There is no transfer of goods involved but there is consumption of chemicals & labour.

    ReplyDelete
    Replies
    1. In our view Pest control is not a works contracts due to following reasons
      1. Property in goods does not transfer as the goods are consumed.
      2. There are certain type of activities are defined under works contract like construction , erection .....and so on and nature of pest control works seems to be not covered under such activities.

      Delete
    2. contract with consumables are not works contract. It is not covered in works contract as property of goods is not transferred but goods are consumed.

      Delete
  3. It is really good !!!!

    ReplyDelete
  4. Contract with consumables are not works contract??
    i really doubt this sentence.
    According to N/N 11/2012 calue of work contract service shall include cost of consumable.
    Can anyone explain me the validity of this sentence??

    ReplyDelete
    Replies
    1. You may be correct , please refer new notification 24/2012.If same thing is written or not and come with detailed answer. If you have information on it then it is very useful for all.Since this is new concept we are also not 100% sure and given our view point only.

      Further answer given in guidance book by CBEC "transfer of property in goods " has been stressed upon.

      Delete
    2. "Works contract" means a contract wherein transfer of property in goods involved in the execution of such contrct is liable to tax as sale of goods.It is to be known that the phrase used is works contract not work contract, works has been defined and accepted legal meaning. as per Black's law dictionery ~works" means 'Building or structure on land'. Moreover the works contract has been dfined in the Act as contract for carrying out some specifice activity,like construction,erection,commissioning,installation,completion,fitting out,improvement,repair,renovatio,alteration etc., or part of threof in relating to any building or structure on land.

      Hence as per Notification no 24/2012 Consumable such as elctricity,water,fuel used in execution of works contract is a part of value of works contract services.

      The pest control is nat a part of works contract hence not taxable under works contract it is taxable under other services.

      Delete
    3. Finance Act 2012 overrules the above definition.
      It includes both movable and immovable property.

      Delete
    4. Revised Definition already given above in the post.

      Delete
  5. In case of pest control service providers, entire annual service contract amount is billed with service tax in the beginning of contract itself. This service tax amount has to be paid to govt within the specific quarter. However some clients do not wish to take further services & so they dont pay us entire amount. Isn't it a loss for us, since we pay to govt full serv tax amount, but we do not receive it back from our clients. Its not fair enough.

    ReplyDelete
    Replies
    1. You can bill monthly or quarterly basis, yearly billing is not suggested under service tax act.

      Further as per service tax act/rules if service has not been provided by you then you can reverse the entry (including service tax) as per service tax rules.

      However if service has been provided but payment has not received then you can not reverse the entry and you have to bad debts loss including service tax.

      Delete
  6. it is quit helpful. Is some one explain rate of tax on earth work to a contractor. kindly tell me on kaithal.kaithal@gmail.com

    ReplyDelete
  7. Sir,

    We was purchase a property in fy 2011-12. Cost of Property is Rs. 9185760-00, in which Rs. 7017000 is loan from a bank & rest is advance payment. We want to know is this property taxable & non-taxable in wealth tax computation in fy 2011-12. & In future is it taxable or not.

    ReplyDelete
  8. Its very nice article and very useful. Thank you sir.

    ReplyDelete
  9. Dear Sir,

    Service Tax Notification 08/2005 is still valid ?

    regards
    Guruprasad

    ReplyDelete
    Replies
    1. Not valid from 01.07.2012 as rescinded vide notification 34/2012 dated 20.06.2012. In this notification 81 notification has been rescinded wef 01.07.2012

      Delete
  10. In Photography and Xeroxing activities, both the elements of goods and services are involved, Whether it would be considered is a Works contracts? From Vijay Chitte

    ReplyDelete
  11. Whether printing contracts and supply of food covers under works contract?

    ReplyDelete
    Replies
    1. No in works contract only construction, erection and repair & maintenance of building etc. are covered. printing and food supply never be included in works contract.

      Delete
    2. no it is not covered undered works contract.

      Delete
  12. Dear Sir
    A Job worker is enganged in removing CI material from a crushing roller, and applying further new CI Material on the said Roller with certain other Jobwork on it. The Contractor is charging service Tax at Full Rate and also charging VAT at Value + service Tax. Contractor is an individual and providing service to a company. In may view contractor should charge service tax on 50% value of 70% of Total Bill Value as it is a repair with CI material which falls under works contract.

    ReplyDelete
    Replies
    1. In This case Both contractor and Company is liable to deposit 50 % of the service Tax. Further Contractor can claim his 50 % part from company.

      Both parties can adopt Valuation method independent to each other.
      Two available methods are

      1) charge service tax on Total contract value minus value of material given by contractor.
      2) Pay tax on 70% of (total contract value +Material given by company to contractor minus amount recovered from contractor for material)

      So in brief you are correct but while calculating 70% value , FOC(free of cost) material,if any , provided by company is to be added in Contract value.

      Delete
  13. Sir,

    We was purchase a property in fy 2011-12. Cost of Property is Rs. 9185760-00, in which Rs. 7017000 is loan from a bank & rest is advance payment. We want to know is this property taxable & non-taxable in wealth tax computation in fy 2011-12. & In future is it taxable or not.

    ReplyDelete
  14. sir,
    please explain whether tds is deductable on website development charges

    ReplyDelete
    Replies
    1. In our view web site designing is covered under section 194J (10%) and maintenance of website is covered under 194C.

      However in both cases Minimum cut off amount is 30000

      Delete
  15. We undertake Air Conditioning contracts at both New & Existing Industries. Our Contracts involve both Supply & installation of material/equipment, commissioning the system & providing the required services, spares & consumables during the agreed warrantee period. Till now, we had been splitting the Orders into Supply (plus State VAT), Labour (Plus Service Tax @ 12%). We provided the break-up of Supply & Labour as per a fair estimate ourselves. Now under the new regime, how do we go about the project billing? What is the definition of the fair value of the goods which would be acceptable to the service tax authorities? What would be the tax structure payable by us ? Is reverse charge compulsory or optional? Can we claim an offset of our payable Service Tax amount by the ED paid by us on the goods supplied to the client?

    ReplyDelete
    Replies
    1. You have two options
      First break the material cost and labour cost .As the material is provided by you ,you can list out the material and may issue a Vat bill and on labour part charge service tax full 12.36

      Fair price means rate that should be the same as charged to other customers to whom you are not providing such type of services means pure spare sale.

      Second option is pay service tax @ 70% of (total value charged from customer+free of cost material provided by service receiver).

      In both options , you can not claim cenvat credit on goods (inputs) used . However you can claim cenvat credit on service tax paid to sub contractor or cenvat credit on capital goods used subject to other cenvat credit rules.

      Delete
    2. Further reverse charge is not optional ,it is mandatory. However it is applicable only if
      1) you(service provider) is a Firm ,HUF, Individual or AOP
      and
      2)Service receiver is a Body corporate(Company ,corporation etc)

      Delete
  16. The reverse charge method is extended to the works contract services to the extent of 50%(partial reverse charge). Thus, 50% service tax is payable by the recipient and the remaining by the provider of works contract service.The condition under reverse charges are
    Service receiver must be a body corporate and
    Service provider must be
    Individual,
    HUF,
    Partnership firm (registered or unregistered ) ,
    AOP.
    Both service Provider and service receiver must be located in taxable territory.
    If above Conditions are not fulfilled then reverse charge is not applicable.Means if service provider is other then four categories given above then reverse charge is not applicable.

    If reverse Charge method is not applicable (i.e. Service Provider is Pvt Ltd Company or Ltd Company) so, who is liable to pay service tax & how much (i.e.50% or 100%)


    ReplyDelete
    Replies
    1. In this case service provider is liable to deposit service tax to department .However he can claim reimbursement from service receiver according to contract between him and service receiver.

      Delete
  17. can any one answer my brother is govt contractor .he is dealing with flood and irrigation department of delhi .whether he is liable for service tax

    ReplyDelete
  18. If we are a pvt ltd construction company and we are giving labour contract but contractor issued running bill without charging S Tax how to calculate s tax liability of service receiver?

    ReplyDelete
  19. we are a real estate pvt ltd company Sell the villas and open plots will sell the land to the customer again we are entered construction agreement with the same customer for construction of villa till now we are paying service tax on works contract service @4.944% on Construction cost first will collect the land cost and then based on construction activity collect the construction cost, on the receipt of the construction cost paying service tax i need whether we are following correct process or not and same time we have given sub contract to construct the villas based on their invoices i am taking cenvat credit

    ReplyDelete
    Replies
    1. If You are entering separate agreement for construction of villas for individual persons for residential purpose then In our view service tax is not applicable.please check with your Tax consultant.

      Delete
  20. Dear Sir,

    In my office, they charge WCT 2% when Service tax and Vat is applicable on Invoices...

    I just wanna to know, is that method and rate perfect to calculate WCT?

    ReplyDelete
  21. Dear sir
    i am an individual and doing repair & maintenance, painting work, garden maintenance work for a pvt ltd. company how much service tax i have to charged in the bill if the gross amount included material & labour charges
    exmple : total value of work including material & labor charges Rs. 10000.00 for painting now plz tell me the rate of service tax

    ReplyDelete
    Replies
    1. Dear Abid ,

      First you can claim exemption for small service provider if service provided by you is less than 10 lakh in a year.

      Further pls provided which type of material ,you are providing ,in painting paint and in other works ????

      whether title of goods is transferred or material is consumed while providing the services ?

      Delete
  22. In case Servicer Provider has opted actual valuation for payment of service tax. This actual valuation is below the valuation rule described in notification (i.e. below 40%,70% or 60% above ). However Service Recipient on the basis of invoice of Service provider pay the 50% of Service tax amount .what will be liability on Service Recipient if it the valuation adopted by Service Provider is rejected by Central Excise Officer and revised value for such taxable service for the purpose of charging service tax has been fixed in the notice.

    regards

    pkgupta

    ReplyDelete
    Replies
    1. Is it so, Department is working so fast ? or query is hypothetical .Any how department can question the valuation in this matter but service receiver can take the benefit that he has taken actual value as per service provider bill and vat is paid on material amount.

      Further answer may vary on the basis of actual facts .

      Delete
  23. Dear Sir, The contract is for fabrication & erection of structures. The structural steel & all capital goods are provided by the service receiver. The service provider provides welding consumables like electrodes (used by his workmen). Are these consumables considered as 'property in goods transfered' - making this contract a works contract? OR this is a pure labour services contract outside the purview of works contract?

    Ravi

    ReplyDelete
    Replies
    1. In our opinion welding electrode is consumable items ,and not covered in transfer of property in goods ".

      Further ,all other material are being provided by service receiver so contract without material is not covered in works contract.

      Delete
  24. Please advise us whether garden maintenance activity to maintain the garden/lawn (other than fruit/vegetable garden) are also covered under horticulture and exempted from service tax .

    ReplyDelete
  25. Thanks a lot for your respone, please note that liability of service provider and service recipient are different and independent of each other, the service recipient can independently avail or forgo an abatement or choose a valuation option depending upto the ease, data available and economics.(Refer point no 10.1.6 of service tax guide issued by service tax deptt and Explanation no II of notification no 30 issued on 20/06/2012. hence in my opinion Service recipient can not escape from liability of differential service tax penalty and interest simply by saying that he has relied upon the invoice issued by the service provider.We request you to please again look into this aspect also.

    ReplyDelete
    Replies
    1. yes you are 100% correct but look at the valuation rule 24/2012 dated 20.06.2012 clause 2A(i)(c)


      "(c) Where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then, such value adopted for the purposes of payment of value added tax or sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract for determination of the value of service portion in the execution of works contract under this clause."

      As per above clause and in given situation ,contractor has charged vat as per actual price (may be assumed by service provider) so he can value the material on the basis of contractor invoice .

      Yes , service receiver should apply his mind, and cross verify the material cost ,so that there is no abnormal variance .

      Delete
  26. Sir,
    Ours is a private partnership firm and engaged in the construction work of Govt. Department of Haryana PWD B&R mainly of work of roads and bridges,but in the FY year 2010-11 and 2011-12 entered into the construction work of religious nature of work in the department of Haryana Tourism Corporation for the cost of 1.25 Crores and one another work of Rs .50 Crore for construction of fencing work of a pond for protecting people from drowning total work for 1.75 crores during both years. We do not have any service tax no. so far.
    Now Central Excise has issued a notice under section 14 of Excise Act that both of these works fall under the service tax payable at the rate of 12% on gross amount reason being that we have not taken service tax so far.
    Please guide us on these points-
    1 Is service tax applicable on religious work and fencing work. Both work are of non commercial and non industrial in nature.
    2 If at all we are liable to pay the Service Tax on both of these services what rate of service tax will be applicable the work agreement was inclusive of all cost of material.(Through rate)whereas we have paid VAT @ 4% on gross amount to State Govt of Haryana.

    ReplyDelete
    Replies
    1. it is exempt from service tax please refer mega exemption under works contract definition.

      Delete
  27. Date: 30-09-2012
    Sir,
    Complexity of Service Tax Law is explained in very simple language along with FAQ. Thank you very much for such a nice notes. I request you to advise about below mentioned query.

    Query: Can we call below mentioned CASE a “ Works Contract”? What shall be VAT and Service tax liabilities ?

    Work Order Title: Repairing of Pump Casing of Oil Dispatch Pump No. – 4 installed at GGS

    Scope of Work:
    • Repairing of Pump Top & Bottom Casing
    • Material of Construction – Alloy Steel / CS Casting,
    • Quantity: 01 Set ( 02 Nos per Set)
    • Activities: Repairing of Worn out pump parts. * Metalizing and built up worn out damaged parts by using L & T Eutectic make welding rods type 680 CGS * Grinding, Machining and Sizing of both Casing at Water Path, Wear Ring Grooves and Lock Plates

    Total Lump Sum Price of W.O.: Rs, 91,000=00 (Rupees Ninety one Thousand) Inclusive of ALL TAXES AND DUTIES VAT @ 5 % and Service Tax @ 12.36 % ( Service Provider and Receiver both have VAT & ST Registration No. )

    Consumption of Welding Rod Material:
    • Cost of New Purchase: Rs. 7692 = 00
    • Cost of consumption from Stock: Rs 6789 = 00
    • Note: Above cost is net cost excluding profit margin and transportation expense

    I shall be highly oblige on receipt of your comments.

    Thanking you with Warm Regards

    Rakesh Shah (BE – Mech)
    Proprietor M/s Krishna Engineers, Ankleshwar

    ReplyDelete
    Replies
    1. Dear Rakesh ,
      A the work is a Lump sum contract and material is also involved so it is covered under works contract.

      Further as per details provided by you service part is higher side ,so you should go for presumptive scheme and should value service part @ 70%.


      As the contract is including service tax so first you should deduct service tax part from it.

      91000 * 100/(100+(12.36*70%)=91000*100/108.652=83754.00

      So amount with out service tax will be =83754
      Add service tax 70% of 12.36%
      on 83753=7246

      Total contract=83753+7246(service tax)=91000

      Reverse charge is applicable if service receiver is company
      ======================================================
      Moreover If service receiver is a company then reverse charge under under service tax applicable and service tax is to be deposited by you and company 50% 50%

      In that case you will recover 50 % from company and deposit the same to department and balance 50% to be deposited by company.

      Gross amount without service tax =83754
      50% of The service tax =3623
      Amount recoverable from company=83754+3623=87377
      amount of service tax to be deposited by company directly to department =3623

      Delete
    2. Regarding VAT state rules are different in each state , so you have to check your state rules

      Delete
    3. Dear Sir ,

      Can we do the above calculation in the following way, if not then pls.clear where is the mistake :-

      91000*70% =637000 (As Per Not.70% of total Value )
      63000*12.36/112.36 = 7007.23 ( Ser Tax Calcu)
      91000-7007 = 83993 Bill Amount with out service tax

      Regards,
      Bal Krishan

      Delete
    4. Dear Bal Krishan,

      As You have already said that contract price includes service tax ,so we can not do calculation 70 % on 91000 as it included service tax also.

      if we take your figures 83993 and charge service tax on 70% value then service tax will be 7267 and total will be 7267+83993=91260

      but we do same calculation on figure provide by us earlier then result will be as under

      83754 *70*12.36=7246 and total will be 83754+7246=91000

      as we are just breaking up 91000 in two part then our answer must be correct in back and forward calculations.

      so you should go for calculation provided by us . In bill no need to show full calculation details.

      Start with bill amount without service tax and then add service tax (50 % ) your part only.

      Delete
    5. Date: 09/10/2012
      Dear Raja Babu Sir,
      Till date I do the same calculation mistake as Mr. Bal Krishan said. Thank you very much for the guidance.
      Above case study is not imaginary still invoicing is pending. I request you for the further clarification.
      • How we can differentiate “Labour” job and “Repairs and Maintenance” job and what are the service tax liabilities in each case?
      • In the question raised on date: 16 September, 2012, 9.50 PM by Anonymous person in this Post use of “Welding Rod” is termed as consumable item and the explained job is consider as Labour Job.
      • But in this case Welding Rods are used as a material to build up worn out area (Metalizing of damaged area by adding material). Can we consider transfer of property/ goods in this case? (Change of same item in different category based on its application)
      I request to comment about below mention 03 types of invoicing pattern and suggest the correct and best pattern.
      In the said case Service Provider is Proprietary Firm having ST Registration Since September, 2005, availing exemption under notification 08/2008-ST from the FY 2009-10 to till date and Service Recipient is Central Govt. Organization.
      Gujarat State VAT on Machine Spares and Welding Rod @ 5 %

      INVOICE TYPE: 01
      NO DESCRIPTION QTY RATE AMOUNT Rs.
      01 Repairing of Pump Casing of Oil Dispatch Pump No. – 4 installed at GGS 01 Set 91,000/= 91,000=00
      State VAT on Material Cost Rs. _______ @ (4 + 1=) 5 % Inclusive
      Service Tax on Repair Cost Rs. ________ @ (12 + 3% on 12=) 12.36% Inclusive
      Total Amount 91,000=00

      Query: What is amount of VAT and ST to be paid by Service Provider?

      INVOICE TYPE: 02
      NO DESCRIPTION QTY RATE AMOUNT Rs.
      01 Repairing of Pump Casing of Oil Dispatch Pump No. – 4 installed at GGS 01 Set 83,754/= 83,754=00
      State VAT on Material Cost Rs. _______ @ (4 + 1=) 5 % Not Applicable
      S. Tax to be borne by Contractor on 70% Repair Cost i.e. Rs. 58628/= 50 % of @ 12.36% ST 3623=00
      S. Tax to be borne by Company on 70% Repair Cost i.e. Rs. 58628/= 50 % of @ 12.36% ST 3623=00
      Total Amount 91,000=00

      Query: VAT liability becomes Zero in Works Contract and No input Vat Credit can be availed?

      INVOICE TYPE: 03
      NO DESCRIPTION QTY RATE AMOUNT Rs.
      01 Repairing of Pump Casing of Oil Dispatch Pump No. – 4 installed at GGS
      (a) Cost of Material used in above Job * 01 Set 18200/= 18200=00
      (b) Charges for Repair of above Job 01 Set 63982/= 63982=00
      State VAT on Material Cost Rs. 18200/= @ (4 + 1=) 5 % 910=00
      S. Tax to be borne by Contractor on Repair Cost Rs.63982 /= 50 % of ST @ 12.36% 3954=00
      S. Tax to be borne by Company on Repair Cost Rs.63982 /= 50 % of ST @ 12.36% 3954=00
      Total Amount 91,000=00

      *Fair Market Value of Goods (Welding Rods) is arrived as {(7692 + 6789) Rs. 14481/= + Cost of Inventory + Price escalation on retail Purchase of Material + Part of Profit Margin} = Rs.18200

      Waiting for your valuable comments and Thanking you with Warm Regards

      Rakesh Shah

      Delete
  28. dear raja

    I am an individual proprietor, providing electrical installations ( which includes both material and labour- which can not be separated ) to a registerd company, what is the service tax rate for my works

    ReplyDelete
    Replies
    1. if break up can not be done , then you can charge service tax under fixed part of 60% of total contract part .

      Contract value X 60 % X 12.36%

      Delete
    2. Since this comes under Works Contract (installation), and service receiver(SR) is a company, you need to collect and pay only 50% tax and balance 50% is to be paid by the SR.

      Contract Value x 60% x 50% x 12.36%

      Delete
  29. PL. TELL US ABOUT A SERVICE IN WHICH WE HAVE RECEIVE THE SERVICE TAX ON FIFTY PERCENT AMOUNT OF BILL, CAN WE SWITCHOVER THE SCHEME OF SERVICE TAX FOR THE REST OF AMOUNT OF BILL.

    ReplyDelete
    Replies
    1. query is not clear , pls ask with details

      Delete
  30. pl tell us about a Rent -A-Car service tax after 01.07.2012

    ReplyDelete
    Replies
    1. In rent -a -Car , abatement of 60% is allowed under notification 26/2012 dated 20.06.2012.subject to condition and on balance amount tax is applicable @ 12.36 %

      http://www.simpletaxindia.net/2012/06/abatement-rate-in-services-tax-amended.html

      Delete
  31. Hi there,

    We have acquired a company name board for display purpose as per specification provided and whole installation is done by the vendor. Vendor has charged CST@12.50% on whole value without showing installation cost, etc. Display Board purchased by vendor himself but prepared it at our design and specification. (again there is no supply of material from our end) vendor has sold the board alongwith services. (no service tax charged). Plz advise whether WCT is applicable and If Yes (at what rate)???

    ReplyDelete
    Replies
    1. Yes, in our opinion above contract is a works contract . As board is a movable goods , you can opt of 70% service and 30 % material option .

      further if service receiver is body corporate and service provider is HUF,Ind,AOP,Firm then reverse charge also applicable and tax should be deposited by service provider /receiver in 50-50 ratio.

      Delete
  32. I AM WORKING UNDER CONTRACTUAL ENGAGEMENT AS PILOT(PERSON WHO BRINGS SHIP IN AND OUT OF PORT) WITH KANDLA PORT TRUST. I AM PAID A DAILY CONTRACTUAL RATE OF RS X/PER DAY.

    PL PROVIDE UNDER WHICH HEADING I SHOULD REGISTER FOR SERVICE TAX.
    THE ACCOUNTS DEPARTMENT ALSO DEDUCTS TDS AT A RATE OF 10% ON MY RATE,AND THEN IT IS PAID.

    PL CLARIFY WITH RESPECT TO SERVICE TAX AND HOW TO RAISE MY BILL TO PORT AUTHORITIES.
    RS

    ReplyDelete
    Replies
    1. Now all the new person are registered under one service code 0441089 only . No separate bifurcation codes service wise provided wef 01.07.2012.

      http://www.simpletaxindia.net/2012/07/same-accounting-code-for-all-services.html

      Delete
  33. Sir, Before 01.07.2012 we are falling in Repair & Maintenance Services, After 01.07.2012 we are falling in Work Contract. So, it require to get new Service Tax Number or Added service in our old Service Tax no.
    Please guide.

    ReplyDelete
    Replies
    1. No , no need to register , now only one service code is to be used for all services ,no service wise detail at the time of registration.Further no change at your end, change of sevice description has been done at department end . http://www.simpletaxindia.net/2012/07/same-accounting-code-for-all-services.html

      Delete
  34. We undertake Electrical contracts at both New & Existing Industries. Our Contracts involve both Supply & installation of material/equipment, commissioning the system & providing the required services, spares & consumables. (Single order for Supply & Labour cost) Till now, we had been splitting the Bill into Supply (plus State VAT), Labour (Plus Service Tax @ 12%). We provided the break-up of Supply & Labour as per a fair estimate ourselves. Now under the new regime, We fall in Work Contract or not ? If we fall in Work Contract,and make supply & labour bill separate, how much service tax we have charges (i.e. 12.36% on 100% labour work). How much liable to pay we are (i.e. 50% or 100%)
    Please guide

    ReplyDelete
    Replies
    1. As the contracts are being taken lumpsum , composite contract ,it is covered under works contract.

      if you want to remain outside the scope of the works contract .Then you should take contract as labour part only . Further in contract provide in the contract that material will be recovered at given rate .

      Further as the contract is covered under works contract ,reverse charge also applicable.

      Delete
  35. As per Service tax notification 24/2012 01.07.2012
    Service Tax Charged on 40% on Basic value
    but before the notification we had taken 33%
    In the WCT Erection Commissioning 67% and 33% charged
    but as per Service tax notification will be Charge 40% on Service tax and 85% on DVAT
    this is double taxation
    Kindly give the rply
    How to do accounts as per rules

    ReplyDelete
  36. As per Service tax notification 24/2012 01.07.2012
    Service Tax Charged on 40% on Basic value
    but before the notification we had taken 33%
    In the WCT Erection Commissioning 67% and 33% charged
    but as per Service tax notification will be Charge 40% on Service tax and 85% on DVAT
    this is double taxation
    Kindly give the rply
    How to do accounts as per rules

    ReplyDelete
  37. Dear Experts

    We are the service recipients have entrusted a fabrication work to service provider on the following terms and conditions:
    1. service recipient provides structural steel at free of cost for fabrication work to the service provider
    2. The service provider has to carry out the fabrication work by engaging his own manpower and tools and tackles. the service provider shall use electrodes foe fabrication and the cost of electrodes has to take care by himself.

    kindly clarify whether the said transaction has to be consider has work contract or pure labour contract.

    ReplyDelete
  38. Hello Sir
    WE are into reality business and work on construction and leasing of Commercial premises. Would like to know the applicability of Service tax and VAT on comprehesive annual maintance contract to be awared for upkeep of capital assest.
    thanks
    protik

    ReplyDelete
  39. Dear Mr.protik

    If any transfer of property involves in the annual maintenance contract then service tax @12.36% will be charged on 70% of the total amount (gross value) and VAT will be applicable as per the respective STATE VAT work contract tax rate or composition rate.

    ReplyDelete
  40. Very good article sir ji

    ReplyDelete
  41. a comprihensive annual maintenance contract of an unregistered housing society's lifts has given to a company.. since july 2008.. the contract amount is 82500/-... does it comes under service tax?? theres no such clause mentioned regarding service tax in agreement.. just written - the contract amount will be 3.5% of the cost value of lifts.

    thnx in adv.

    ReplyDelete
    Replies
    1. Yes , service tax is applicable on AMC of lift .But as the contract has not specified that service tax is payable by society ,so society can contest the issue that service tax is included in the contract rate and service tax is a liability of the contractor .

      Delete
    2. Date:24/10/2012
      Dear Sir, Shri Raja Babu,
      We are engaged in Manufacturing of machine spares as per customer requirement and Repairing/Reconditioning of process equipments in the Gujarat State.
      We are having LST (Gujarat) VAT NO and Service Tax Registration under Repairs and Maintenance category.
      Neither we have opted Lump sum payment of VAT or ST nor having Works Contract Tax No with any of department.
      We also take tax Credit of VAT/ST paid by us while paying VAT/ST to government respectively.

      May we pay Service tax at composite rate on 70% value of works contract ?

      Shall we have to pay VAT on balance 30 % value of Works Contract ?

      Regards,
      Deep Shah

      Delete
    3. Composite rate is not mandatory . If you have breakup of material for a contract then you can take action as per break up.Pay vat on material part and service tax on service part.

      Further if you adopt presumptive rate of 70 % under service tax act ,you can not charge vat on balance 30 % amount as it should be charged as per vat act and may be less or more as per vat act requirement .so total tax may be less or more than 100% of the value.

      Delete
  42. We are an interior contracts firm. Some of our orders are only civil and interior fit out works and some times it included interior, electrical, HVAC, Networking works also. We have been paying service tax on composition basis. What shall be our liability now. In the interior fitout works the material content is close to 60% but can not be ascertained at the time of our raising the bill. Please advise.

    ReplyDelete
    Replies
    1. As you have told that you can not ascertain the amount of material on actual basis ,so you can adopt presumptive scheme under service tax.

      pay service tax on 40% of total contract if work is original means new

      and pay 60% of total contract if work is not original

      here total contract value also Include free of cost material provided by the service receiver

      Further if you are not company and service receive is company then 50% of the assessed tax is to be deposited by service receiver .
      http://www.simpletaxindia.net/2012/08/service-tax-on-works-contract-valuation.html
      read more here
      http://www.simpletaxindia.net/2012/06/new-services-under-reverse-charge-in.html

      Delete
  43. We undertake Air Conditioning Mfg., Trader and Workcontracts at both New & Existing Industries. Our Contracts involve both Supply & installation of material/equipment, commissioning the system & providing the required services, spares & consumables during the agreed warrantee period. Till now, we had been splitting the Orders into Supply (plus State VAT), Labour (Plus Service Tax @ 12%). We provided the break-up of Supply & Labour as per a fair estimate ourselves. Now under the new regime, how do we go about the project billing? What is the definition of the fair value of the goods which would be acceptable to the service tax authorities? What would be the tax structure payable by us ?

    ReplyDelete
  44. We issue cement and steel to the agency .Agency has to undertake construction of building .rest all activities are in his scope . whether this is a work contract?

    ReplyDelete
    Replies
    1. if agency is providing material ,like sand etc then it is a works contract

      Delete
    2. But these sand etc are not chargeable to sales tax but royalty is payable.

      Delete
    3. Sand is exempted from sales tax but it is covered under sales tax .Further it is sales of goods which can not not be covered under service tax as such and not covered in services definition

      Delete
  45. Raja babu
    Thanks a lot for the prompt reply

    please clarify your second portion of reply......

    "Further it is sales of goods which can not not be covered under service tax as such and not covered in services definition".

    ReplyDelete
  46. Works Contract done before the new amendment in service tax, and invoice served after 01.07.2012, then should we pay the service tax on the billed amount..?
    And also explain, is the below mentioned scenario attracts the works contract and Service Tax:
    staircase supply : 998750
    wall hand railing : 404040
    --------
    Total : 1402790
    VAT @ 12.5% : 175349
    -------
    TOTAL : 1578138
    =======

    Is service tax be applicable in this case or not..?
    please suggest.

    ReplyDelete
  47. house keeping of office and toilets in a factory on annual contract basis, rate are including of all using chemicals and consumable.
    the above work is 'works contract'?

    ReplyDelete
    Replies
    1. In my view it is not covered under works contract as the property of goods is not transferred while executing the contract .

      Delete
  48. supply of 12 men workers in all days to attend various jobs of operational work in a factory. this work is 'man power supply'?

    ReplyDelete
    Replies
    1. if factory has allotted you a specific work and to do that work you have employed some workers and worker control and supervision is with you(contractor) then it is not treated as manpower supply .

      if control and supervision is of factory and no specific work is allotted then it is a man power supply.

      Delete
  49. Sir,
    We are thinking of going for a painting contract of structures. Paint has to be supplied by the contractor. The cost of paint and labour is included in our estimate. But contractor will be paid only on area painted. IS WCT is applicable for this work.

    ReplyDelete
  50. Dear sir,

    I am a civil engineer, cum LAND OWNER, cum designer, cum contractor, building 12 apartments (exactly 12). The work started on 02nd october 2011, and one agreement for selling of an apartment unit was made on 10th nov 2011.
    What is my service tax liability.

    Since I am the land owner how is taxation for land owner cum builders.

    Best method to adopt for service tax incase of liability.

    thanks in advance.

    ReplyDelete
  51. In my view best method is include land value for calculation of service tax

    you will get 75% abatement for land value .plus you are also eligible for cenvat credit other than on inputs means cenvat credit will be available to you on services and capital goods.

    Further as the service tax is to be recovered from the purchaser so no effect on you as such but it will be beneficially for purchaser.

    suppose you sell a house @50 lakh including land cost.
    you have to deposit tax as under
    sale price =50Lakh
    less :abatement 75% for land etc=37.50
    net value =12.50
    service tax on 12.50@ 12.36%= 193125(you can charge this to purchaser)
    less :cenvat credit available on input services and capital goods
    =suppose (30000)
    net amount payable to govt =193125-30000=163125

    ReplyDelete
  52. i have small doubt , we are paying service tax on customs house agents invoice , now we can claim in put service tax

    thanks
    ss

    ReplyDelete
  53. I have one doubt regarding service tax. Please clear it.
    According to new rules of service tax WCT is payable in following manner-

    In case of original work, pay service tax on 40% value,
    In case of maintenance or repair or reconditioning or restoration or servicing of any goods, pay service tax on 70% value,
    In case of all other works contract, pay service tax on 60% value.

    Service provider is also eligible to avail CENVAT Credit of input services and capital goods.

    (A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent. of the total amount charged for the works contract;

    Explanation 1.- For the purposes of this rule,-
    (a) “original works” means-
    (i) all new constructions;
    (ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;
    (iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;

    (B) in case of works contract entered into for maintenance or repair or reconditioning or restoration or servicing of any goods, service tax shall be payable on seventy percent. of the total amount charged for the works contract;


    70% is applicable on Movable property

    Section 65B(25) "goods" means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;

    (C) in case of other works contracts, not covered under sub-clauses (A) and (B), including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property , service tax shall be payable on sixty per cent. of the total amount charged for the works contract;

    Now my question is that explanation is saying only about immovable property not about movable property. then what rules will be applicable in case of work contract of movable property.

    ReplyDelete
    Replies
    1. In case of movable property 70% is applicable . In this rules word has been used as goods instead of movable property .And movable properties are covered in the definition of goods it self.

      Delete
    2. ok i agree that service tax is applicable on movable property but it is only taxable when it(movable goods) is in related to building or land

      give your view on above

      Delete
    3. Now ,no such condition that works contract is related to building only.

      all movable property an immovable property covered

      Delete
  54. Whether work given for tower will fall in movable property or immovable property

    ReplyDelete
  55. we given civilworks contract to build industrail sheed with inclusive of all taxes the contractor agin claim service tax.contractor is elgible for service tax?

    ReplyDelete
    Replies
    1. pls ask with details . And pls provide your status as well as of contractor's status );like individual/firm company etc)

      Delete
  56. Dear Sir

    We are a construction Company and have a contract to build a building for a charitable trust. The contract is inclusive of labor and material and say the total bill is of value Rs. 100... I would like to ask which is the best way to bill our client so as to minimise taxation. we also have an option where the client can directly purchase material and we present the labour bill only. Please advise how to bill.

    ReplyDelete
    Replies
    1. if material part is less than 60%(service part is more than 40%) then go far composite work and pay tax @ 12.36*40% on whole contract value of 100 rs =4.944.

      However if material value is more than 60% (service part is less than 40%)then purchase material directly and go for labour contract @ 12.36%

      Delete
  57. Dear Sir,

    We are Pvt Ltd Company getting manufactered hoarding and glow board (in the name of company) from individual vendor . Dose the abvoe covered under work contract service defination or not.

    Regards,
    Bal Krishan

    ReplyDelete
    Replies
    1. Waiting for your reply !

      Delete
    2. In our view it is a sale of goods contract and vat should be applicable and not service tax

      Delete
    3. What be will be in the following case .

      These hoardings & glow sign board are perpared as per company specification and also installed by vendor.

      Delete
    4. Pls. reply sir !

      Delete
    5. Answer remain the same , that it is sale of goods not sale of service

      Delete
  58. Dear Sir,

    We are a start up company, providing water treatment plants which involves design,engineering,supply of equipments,erection & commissioning of Plant. We exclude all type of civil works like construction from our scope. However our supply portion involves supply of Fabricated as well as boughtout equipments like pumps, pressure vessels,etc. Can you please specify what type of taxes will be applicable for us while charging our customers?. Please help.

    ReplyDelete
  59. Dear Sir,

    1. We are a partnership firm situated in a tax exempted zone( no excise, no income tax). we received works contract service from a (ST. Regd.)partnership firm. whether we are liable to pay service tax to them???

    2.We issued material to them from own store and issue debit note to the party.....whether on this material (up to 40% value) we are also liable to pay service tax even we are claiming vat credit on this material???


    Regards,
    Nitin Gupta

    ReplyDelete
  60. Thanks sir.. Its a very good piece of information which will help me in doing my work.

    ReplyDelete
  61. what is the service tax liability on sub-contractor (proprietorship firm) doing shuttering work on labour rate (without material) for a contractor which is coompany

    ReplyDelete
    Replies
    1. as regular 12.36 % ,further if it is in the nature of man power supply then reverse charge will apply and 75 % is payable directly by service receiver.

      Delete
  62. We are public limited company, constructing own building personal use for office purpose, we have labour contract for supply of man power for skilled labour.
    Now my question whether its applicable for reverse charge of 75 % service receiver and 25 % Service provider or not..


    ReplyDelete
    Replies
    1. Yes , it is applicable on such works also.

      Delete
    2. Thank you sir, as per below mentioned rule say

      "As per the service tax rule TRU’s letter F.No. B1/6/2005-TRU dated 27/7/2005"
      Para 13.4
      However, residential complex having only 12 or less residential units would not be taxable. Similarly, residential complex constructed by an individual, which is intended for personal use as residence and is constructed by directly availing services of an construction service provider, is also not covered under the scope of the service tax and not taxable.


      Please clarify on this..

      Delete
    3. First ,
      1.You are constructing the Building as Company not as an individual
      2. 12 residential house clause now changed to more than one house.
      3.You are constructing a office building not residential.

      so service tax / reverse charge remains applicable on you

      Delete
  63. Dear Sir,

    If a Pvt. Ltd. Company have given a Service contract to a individual firm for labors work on its construction site and Whole of the material will be provided by the company in the contractions. Does the above contract cover under work contract or not, if covered then under which service!

    ReplyDelete
    Replies
    1. It is not covered under works contract ,however service tax remain applicable .

      Further reverse charge is applicable on you(company) if labour services are of manpower nature .However if it is of job work and supervision and control is with contractor then reverse charge is not applicable.

      Delete
  64. WE HAVE TAKEN LAND FOR DEVELOPMENT ON LEASE , HOW IS SERVICE TAXATION IN THIS CASE.

    ReplyDelete
  65. Hi Raja Babu,

    Your article is very useful to understand new service tax law

    we are engaged in the business of interior work for ATM this includes cost of Furniture & fittings so how can we calculate service tax & Vat on this
    for example furniture & fitting cost 1,00,000
    labor charges 50000
    so how we calculate taxes ( Service Tax & Vat on this)
    Please reply ASAP
    and also confirm abatement notification is not applicable from 01.07.12????????

    ReplyDelete
    Replies
    1. If the material contract is specified separately in contract it self then it is not covered under works contract as such . so you should charge vat on material portion and service tax on labour portion .

      If contract is given without any break up then it is covered under works contract you have two options
      1. you can reduce material cost from total and pay service tax on balance amount.
      2. You can pay service tax on 40% of total amount as it is a new works contract for original work(not repair (for repair 60 % service tax applicable.) .But vat is to be paid on actual basis .

      Further if you are working as an propfirm , partnership firm or HUF/AOP and service receiver is body corporate then reverse charge is applicable and 50% service tax is to be deposited by the service receiver directly .

      Delete
  66. Dear sir,
    When an estimate is prepared combining materials and labour by taking local material rates which inclusive of all taxes and duties, can we add again WCT at the rate of 5% on material or 5% on 70% of total value(material+labour). whether TDS of WCT can be made at the rate of 2.8%(4% on 70%) or 3.5%(5% on 70%) of total value of bill payable.

    ReplyDelete
  67. dear sir,
    when a company billing to a customer (in case of construction) on which amount the customer charges for S.T., providing all types of service

    ReplyDelete
  68. Dear Simple Tax India,

    the service provider should pay his portion of service tax from his pocket or collect it from the service receiver - could you please clarify...

    thanks and regards,
    nagarajan

    ReplyDelete
    Replies
    1. No rule defined under service tax ,it is generally recovered from service receiver ,however it is depended upon agreement between sp and sr ,according to which it is to be decided .

      Delete
  69. we are procesing of cattle feed & poultry feed, let me know that whether service tax on processing of cattle feed & poultry feed is applicable

    ReplyDelete
  70. Amazing article with complete clarity.

    ReplyDelete
  71. Sir,
    We are the sub-contractors of a company. Recently,they had given us the work which we have given as a sub-contract to another company.
    Now,our contractors give us our bill amount+service tax and from this payment, we pay to our sub-contractors (bill amount+service tax) and the service tax amount should be paid by the company to whom we have given the sub-contract.i want to know is when our contractors pay us our bill amount,we want avail credit for it since we have given the sub-contract and we have paid the service tax amount extra to our sub-contractor. how should i show this in Form ST3(service tax online) .For Eg. our bill amount+service tax to our contractors is Rs.100

    our payment(billamount+service tax) to our sub-contractors is
    Rs.50
    now we have to avail a credit in this. where should i show this in form ST3 and how to do it? Kindly help

    ReplyDelete
  72. Hiee plz let me know actually we have contract at hyderabad against wct catagory and we raise bill as 4.8% st on basic value 2% es & 1 % ses and agaisnt the total bill value party deduct 2.80% wct and it paid to ggovt plz tell me how we submit the return

    ReplyDelete
    Replies
    1. this is as per rule that service receiver (if company) has to deposit the 50 % tax directly.so accordingly file return

      Delete
  73. Dear sir,
    repairing service provided by CPWD to a company whether it is liable to service tax under reverse charge mechanism???

    ReplyDelete
    Replies
    1. please read link
      http://www.simpletaxindia.net/2012/06/new-services-under-reverse-charge-in.html

      and assess
      CPWD is government or not

      if answer is yes then
      service provided is covered under support services or not
      if yes

      reverse charge is applicable

      Delete
  74. Sir,
    M/s ONGC Ltd., has issued work order to Proprietory Firm "KE" for reconditioning/repairing of Pumps at Lump Sum Price "Z" inclusive of all taxes, duties, levies, insurance, octroi, cesses etc. "KE" raised invoice mentioning (a) Cost of Material Supplied i.e. Spares and Hardwares etc. (Inclusive of VAT Amt) Rs."X" + (b) Cost of Labour for repairing, Assembly, Comisioning (Inclusive of S.T. amt) Rs. "Y" = Total Amount Rs. "Z" (i.e. WO Amount). Respective Tax amounts are not shown seperately in the said Invoice. To calculate Service Tax liabilities under Reverse Charge Mechanism Basic Cost of Service provided for repair of pumps considered by Service Provider "KE" is Rs. ("Y"/1.1236) and by Service Receipent M/s ONGC is Rs. ("Z" * 0.7/1.1236). My query is which Basic Cost of Sevice is correctly calculated ? How this deviation is to be taken up with Service Tax Department in future ? Please advise at the earliest possible.
    With Regards,
    Rakesh Shah

    ReplyDelete
    Replies
    1. As provided in post above there are two methods to valuate service part in works contract .
      1. deduct material value from total works contract amount.
      2, calculate through composite scheme .
      further as per reverse charge circular 30/2012 service provider and service receiver can adopt any of these methods.

      In your case KE has adopted first method and ONGC has adopted second method and both are correct.

      The main thing KE should keep in mind that material value charged (X) should also be declared in Sales TAX records as IT IS and prices of material should be reasonable means it doesn't appears that material has been declared on higher side to save service tax.

      Delete
    2. Sir,
      Thank you for your immediate reply. With declaration of material value to Sales Tax Department "As It Is" respective amount of VAT is PAID. What is to be done for establishing reasonability of declared Material Cost ?
      Secondly two different amount of Service Tax shall be paid to the ST Department for ONE PERTICULAR INVOICE by service provider and receipent. Will ST Department raised query for the same ? What should be our action as Service Provider ? Payment receivd after submitting VAT and Challan to the Sales Tax Department. Please advise and oblige.
      With Regards,
      Rakesh Shah

      Delete
    3. Dear Rakesh ,
      please read explanation II in notification 30/2012
      "Explanation-II. - In works contract services, where both service provider and service recipient is the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service"

      by providing this option it is very much clear that service provider and service receiver can opt different method and there are different service tax liability in all the methods.

      so there is nothing wrong in opting different method.

      Delete
  75. Sir,
    ONGC placed Work Order for "Fabrication of required items (as per sample) to repair 3PP-300 Mud Pump of work over RIG". ONGC provided samples only. We have to fabricate and delivered new material as per sample.
    Under contract cell, ONGC placed WORK ORDER to supply material (Not Purchase Order nor ARC).
    Whether in this case Service Tax and TDS are applicable ?
    If not, what is legal procedure to reclaim the same as ONGC release payment after deducting both Taxes?
    Please advise. Thanking with Regards,
    Rakesh Shah

    ReplyDelete
  76. As per Sect 194C ,work order without material from the principal is not covered for TDS .

    read here
    http://www.simpletaxindia.net/2009/11/tds-on-job-work-us-194c-amended-from.html

    Further Service tax also should not be applicable as you have provided material not services.

    ReplyDelete
  77. hi, this is relating to uniform ( corporate) stitching -
    co A has entered in a contract with co B
    CO A will supply material (suiting) (foc), co B is required to get it stitched in various sizes (say 1000 pants each size), it'll include incidental material such as zips, buttons, thread etc

    will this amount to wct ? - co B has sold it to co A after charging cst
    the sub-contract from whom co B got it done, has also sold it to co B after charging CST.

    Plz suggest on applicablity of service tax/wct
    tx

    ReplyDelete
  78. For Electrical contractor in which service head taxable

    ReplyDelete
  79. Sir can you please tell me the difference between work contract & Civil Work?
    and how we can identify whether particular work is a work contract or not?

    ReplyDelete
    Replies
    1. Works contracts means a work in which material is also supplied by contractor. Where as civil works is related to construction /Buildings etc

      Delete
  80. Sir Whether we are required to deduct tds on work contract on construction of building also if both material & labour are supplied by contractor???
    And whether contractor can show amount of material and labour supply separately in his bill and show VAT on Material and Service Tax on Labour supply???

    ReplyDelete
  81. when materials in a contract sechudle-a is purely material portion and schedule-b is labour portion and small quantum
    of materials which cannot be seperated.in such case the abetment of service tax can be worked out on total of schedule-b
    or on grand total of contract that is shedule-a+schedule-b. please clarify

    ReplyDelete
  82. Sir, I am into construction work in U.P. I construct flats and sell them. I just want to know what taxes would be applicable if I am getting income of Rs 6,920,507,000 after investing Rs. 3,631,940,973. I am receiving profit of Rs 3,288,566,027. It is around 85% profit.
    Kindly reply on my email id- desirelife321@gmail.com

    ReplyDelete
  83. Sir, I am working in a restaurant registered as a company and have many motorcycles for home delivery purposes. I want to ask about the treatment of service tax reverse charge on repair work done by local mechanics and also servicing done by them. Do I calculate and pay service tax (reverse charge) when there is no proper billing but the service charges total up around Rs. 50,000/- per month

    ReplyDelete
    Replies
    1. Servicing and repair without material is pure service contract and not covered under works contract ,hence no reverse charge is applicable.

      In other case where repair is being done with material ,then works contract applicable , so to avoid reverse charge under service tax ,you company should purchase material required for repair directly and get the services and repair form local mechanic

      Delete
  84. sir i want to know that what percentage of bill we have to pay service tax for pest control service

    ReplyDelete
  85. sir i want to know what percentage of service tax we have to pay for pest control service


    ReplyDelete
  86. Sir,
    I have read your article regarding Service Tax on Works Contract and also have read the discussions-portion. I am still not clear about few things, would you please be kind enough to explain these:

    (i) If an individual is a Govt Works Contract means he is executing contracts awarded by various Govt Departments for value of more than 10 lakhs in one year, would he be liable to get registered for Service Tax or not? As I understand as per negative list, govt contracts are exempt.
    (ii) If a contractor mentioned in para (i) also undertakes works contract from private person or company for a value of more than 10 lakhs (excluding the payments received from the Govt Departments), then what would be treatment of service tax, is it payable on payments received from private person only or on the total payments received by him in a financial year.
    (iii) If a contractor mentioned in para (i) has taken a contract from Pvt Company for erecting a structure on land for say about 15 lakhs and material of about 10 lakhs has been provided by the Pvt Company, what would be the status of Service Tax, if the contractor is doing only labour work.

    ReplyDelete
    Replies
    1. (i)First not all the Govt contracts are exempted but yes most of them are . you should check sr no 12,13,14 of 25/2012 mega exemption.If you are providing exempted services then no need for registration.

      http://www.simpletaxindia.net/2012/06/negative-list-of-services-revised.html

      (ii) service tax is payable on taxable services only , if you are providing exempted service to govt and taxable services to private persons ,then tax is applicable on taxable service only

      (iii) In this case taxable services is only 5 lakh and if we assume that govt services provided is exempted then no need for registration and tax payment as total taxable services provided will be 5 lakh

      Delete
  87. Sir,
    Ours is proprietary concern engaged in manufacturing spares and maintenance & repairs of equipment of chemical industries in Gujarat State only.Turnover of taxable service in FY 2011-12 & 2012-13 are below 10 Lakhs.
    May we take exemption while filling ST-3 for July-Sept, 2012?
    If yes, Which notification no in Column no.: A 11.2 is to be mentioned and Should we have to fill up data in Part B, D, E and F.
    If we have to fill up data, We understood that we have to fill up B1.3, D3, E3 and F3 column of Form ST -3. Please correct all errors.
    In past we had paid ST on payment receipt basis and availed ST credit by adjustment of amount paid as service tax on In-put Service IN FY 2008-09. Please advise. Thanking with Regards,
    Deep Shah

    ReplyDelete
  88. AS PER SECTION 65B(54)
    "works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and
    such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, improvement, repair, renovation,
    alteration of any building or structure on land or for carrying out any other similar activity or a part thereof in relation to any building or structure on land;

    ABOVE DEFINITION DOES NOT COVER MOVABLE PROPERTY

    SO SERVICE TAX DOES NOT APPLY ON CAR REPAIR SERVICE

    ReplyDelete
    Replies
    1. The definition given above is old one and already been changed and now works contract included for movable property

      works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance. renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;

      Read more: http://www.simpletaxindia.net/2012/08/service-tax-on-works-contract-valuation.html#ixzz2SE25vp1s

      Delete
    2. Sir
      what is the source of the amend definition?

      Thanx

      Delete
  89. Sir,
    We being a body corporate have made a contract with an individual to carry out renovation of our building under works contract. Material shall be provided by the provider of service.
    Our query is, since the service provider is not registered under Service tax thereby does not issue invoice as per Rule 4A of Service tax Rules, 1994, whether we are still liable to pay service tax under reverse charge?

    ReplyDelete
  90. IN THE PRESENT REGIME OF SERVICE TAX FOR THE WORKS CONTRACT THERE ARE TWO OPTIONS
    1. SERVICE TAX WITH ABATEMENT
    2. SERVICE TAX WITHOUT ABATEMENT WHERE THE VALUE OF THE GOODS INVOLVED IN THE CONTRACT ARE DEDUCTED FROM GROSS VALUE CHARGED FOR THE GOODS AND THERE FORE THE CENVAT CREDIT TO THE EXTENT OF THE GOODS CANT BE CLAIMED.

    MY QUESTION IS CAN WE HAVE AN OOPTION WHERE IN WITH OUT DEDUCTING THE GROSS VALUE CHARGED FOR THE GOODS, CAN WE TAKE THE CENVAT CREDIT OF THE GOODS INVOLVED IN THE CONTRACT.


    THE OPTION WHICH I HAVE CITED WAS AVAILABLE BEFORE THE NEGATIVE LIST WAS INTRODUCED.
    DO WE HAVE SUCH AN OPTION NOW.

    PLEASE REPLY ITS URGENT

    THANKS IN ADBVANCE

    ReplyDelete
  91. Hey can any one tell me about the provisions applicable for works contract in case of builder who builds the commercial properties ans residential properties as well. I want to know the reverse charge mechanism as well on the same.

    Also please tell me about DVAT provisions and Service Tax provisions for the above mentioned assessee.

    If it's possible to publish the full article for the same then it is very helpful for me at least.

    Thanks in advance.

    ReplyDelete
  92. We are doing a comprehensive operation and maintenance contract of drinking water supply pumping machineries for a Government Agency (GWWSB)wherein we have to keep workers for operating machines and we pay them salary monthly. We have to also get the machines repaired from outside whenever breakdown occurs. We also supply consumables such as oil, lubricants etc. for smooth running of machineries.

    Please help me, How do I bill to the Department keeping in view of my service tax liability.

    Thanks

    ReplyDelete
    Replies
    1. As per ngative list sr no 12(e)
      >12. Services provided to the Government, a local authority or a governmental authority by way of construction,erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of

      (e)pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal
      is exempted .

      so please check whether you are covered in above clause , if yes ,then no service tax applicable

      otherwise you have to pay service tax on full amount

      Delete
  93. Dear Sir,

    I would like to clear the doubt which is as below:

    I am having a proprietor ship concern doing Erection, commissioning and installation of Air conditioners and its ducts.i will be charging Karnataka Vat @ 14.5% on 75% of the invoice value.and Service tax @ 12.36% on 25% of the invoice value. However, i will be billing only to Pvt limited companies and they are considering my invoices under works contract services and paying 50% of Service tax as per reverse charge mechanism and i am clear with this.and i am also billing to Partnership firms only for labor charges and i am collecting 12.36% Service tax on whole amount and paying it to the government. But for providing labor services i will be hiring individual contractor ( Although they are not having any firm not even PAN numbers as they are only having little bit expert knowledge about installation services and they want to charge sum amount for any particular works. and i will be paying them the cash part by part through payment vouchers after getting a signature from them. ( Please note that my annual turnover will not cross 50 Lakhs) and i am not deducting any tds on the same. Further i would like to know whether i need to pay service tax on the amount or the value of service which i am receiving from these individuals as a reverse charge mechanism. I would request you to kindly clarify the same as i am not getting proper response from even from my Auditors.

    ReplyDelete
    Replies
    1. Reverse charge under works contract/manpower service is applicable only if service receiver is a Corporate means company .
      As you are prop ,reverse charge is not applicable on service from such worker .
      Turnover have no relevance in RCM

      Further service provided by such worker is not covered under works contract or manpower services.

      However I have doubt on correctness of charging service tax on 25 % value, as under service tax ,for new works 40 % is required to be charged for original works and 60 % from repair works.

      Delete
  94. I have a query. A proprietary concern doing works contract for a corporate entity. He charges 50% of Service tax as applicable under reverse charge mechanism. He collects that 50% service tax and pays to the Government. While carrying out the works contract, he gets some work done on sub-contract basis and pays 12.36% service tax to the sub-contractor at the time of making payment.
    My Query is can he take set-off of service tax paid to the sub-contractor while paying the service tax?

    ReplyDelete
  95. Hi Sir,
    We are into Interior Decorator and we under works contract, please let us know is my calculation is correct or wrong.
    Basic Value Rs. 50,000.00
    VAT @ 14.5% on 70% of basic value ( Material) - Rs. 5,075.00
    Service Tax @ 12.36% on 40% of Basic Value ( Labour)
    ( Only 50% is considered) - Rs. 1,236.00
    ------------------------
    Total Bill Value - Rs. 56,311.00
    ----------------------
    We, Service Provider : Partnership Firm &
    Service Receiver : Company, Chennai
    1. Also am having doubt suppopse if we charge service tax on 40% of value under reverse charge method, than what about remaining part of 60% should be considered, will this called as REBATEMENT? and same how to show in return. .

    2. If we recieve advance towards works contract under revers charge method, how tax is calculated, should i need to pay only 50% tax on 40% of value.

    Please help me
    BMurthy

    ReplyDelete
  96. Hi Sir,
    We are into Interior Decorator and we under works contract, please let us know is my calculation is correct or wrong.
    Basic Value Rs. 50,000.00
    VAT @ 14.5% on 70% of basic value ( Material) - Rs. 5,075.00
    Service Tax @ 12.36% on 40% of Basic Value ( Labour)
    ( Only 50% is considered) - Rs. 1,236.00
    ------------------------
    Total Bill Value - Rs. 56,311.00
    ----------------------
    We, Service Provider : Partnership Firm &
    Service Receiver : Company, Chennai
    1. Also am having doubt suppopse if we charge service tax on 40% of value under reverse charge method, than what about remaining part of 60% should be considered, will this called as REBATEMENT? and same how to show in return. .

    2. If we recieve advance towards works contract under revers charge method, how tax is calculated, should i need to pay only 50% tax on 40% of value.

    Please help me
    BMurthy

    ReplyDelete
    Replies
    1. YES , your calculation are correct ,if you are doing original work as defined above in the post .if you are doing repairing /renovation etc then 40 % changed to 60 % .Further material supplied by service receiver free of cost is to be added to calculate 40%/50 % amount.

      Further ,you should/may make a practice to issue invoice for advance also and your calculation for advance is also correct if work is original.

      Moreover you should also mention on bill that 50 % service tax amount is directly payable by service receiver(where ever applicable)

      May be raised as under
      =Basic =50000
      add vat =...............
      service tax @12.36 % on 40 % on basic =2472
      less :50 % service tax to be paid by service provider =1236
      net service tax =1236
      total value =50000+vat+1236

      Delete
  97. Thank you Sir for your reply,

    i understood but what about remaining part ie. if service part is 40% and remaining 60%. This 60% how to show in service tax returns, in returns am getting options are deductions and abatement. So please tell me how to treat this.

    for Ex: 100% Value
    Service part is - 40%
    balance -60% ???? how to show this in returns


    Also please can you share me notfications for the the same.

    Thanks,
    BMurthy

    ReplyDelete
  98. Hi Sir,
    Please reply. Thanks.
    Bmurthy

    ReplyDelete
  99. For eg: if there is a builder name mr A ,he ask mr x who is a contractor to construct a building by using his own material i.e mr x material...so i wanted to knw whtr mr x comes other works contract or not?...

    ReplyDelete
  100. Dear Sir,

    Ours is a publication house ( pvt. ltd. company) and our manufacturing activities i.e. printing and binding are outsourced from local vendors. The job work contract provides for payment on unit basis inclusive of cost of consumables and transportation. kindly advise us regarding our service tax liability as service recipient

    ReplyDelete
  101. One of my client is providing photocopier and printer on hire to its clients. My client has to provide inks and maintain machines in running condition. Its average material cost is around 50% of its monthly invoice. So say invoice is of Rs. 10000(net), how much my VAT (in Gujarat) and Service Tax my client has to pay?

    ReplyDelete
  102. One of my client is providing photocopier and printer on hire to its customer. What will be VAT and Service Tax on the same if his invoice for the month is say Rs.10,000 net.

    ReplyDelete
  103. Dear Sir,

    We are Executing Hescom NJY Electric line work means supplying material, Executing work like execting pits,errection of poles, line work,up to commissioning through sub contractor ie by firm and also PVT ltd company how to take the Invoices from Firm and PVT LTd company ours Work order is including Vat, Service Tax but client deducting on ours bills ie. TDS, WCT, and Cess kindly advise in this Regards,

    ReplyDelete
  104. Under Reverse Charge mechanism - Work COntract services.
    Service Provider is Billed by showing 12.36 % on 100% value instead of 50%. They are also remitted the amount by mistake. What is the Provision for Service receiver.? whether they require to pay 12.36% on 50% value .. please revert.

    ReplyDelete
  105. AS mentioned In the article. Is any Notification for "Exemption to sub contractor in work ccontract if main contract service are exempted -". Is it applicable for Workcontract at SEZ unit. if yes. what are the documents to be obtained by the subcontractor for this exemption.
    Kindly suggest.

    ReplyDelete
  106. We per work order clause we are recovering "Compensation for delays (LD) i.e. 1% per week on contract value/unfinished contract value subject to maximum 5% of contract value/unfinished contract for delays attributable on contractor part. Please advise us whether we are liable to pay service tax on such recovery. regards pkgupta


    ReplyDelete
  107. As per work order service receiver need to pay incidental / traveling expenses to the service provider of Works Contract Service for Repair and Maintenance works where service provider charging Service Tax on 70% bill value including incidental / traveling expenses..

    Is it correct for the service provider to charge service tax on 70% value including incidental / traveling expenses
    or service provider need to charges service tax on 70% value excluding incidental / traveling expenses and for incidental / traveling expenses service tax would be charged on 100% value.
    Regards
    D.Dey

    ReplyDelete
    Replies
    1. The total contract value includes payment of incidental charges, so it is correct to charge tax on 70 % value

      Delete
  108. HI, Sir, can a individual work contractor claim the benefit of Rs.10 lakh (SSI exemption) who is providing service to pvt. ltd.company and to individual. (i.e under reverse charge & under normal charge). and also provide difference between "Maintenance & Repair Service (Tax rate 12.36%) " and "Repair & maintenance under work contract (Tax Rate 12.36*70%).

    ReplyDelete
    Replies
    1. yes , 10 lakh exemption can be claimed by all service providers

      Delete
  109. Thanks for Quick Reply,
    Sir, Please tell me, Whether the service tax liability of 50% under partial Reverse charge under work contract service can be shifted by SERVICE RECEIVER to SERVICE PROVIDER by entering a clause in the contract as "The Contractor shall bear and pay all taxes, duties and other liabilities in connection with discharge of his obligation under this order" ??
    [see case Law - Rashtriya Ispat Nigam Ltd. 2012(S.C)]

    if yes then (i) can the service provider claim the SSI exemption of Rs.10 lakh for 100% value (i.e 50% + 50%)??

    (ii) How will we show that amount in Service Tax Return as Service Provide under Reverse Charge or Normal Charge??

    (iii) and also provide difference between "Maintenance & Repair Service (Tax rate 12.36%) " and "Repair & maintenance under work contract (Tax Rate 12.36*70%).

    ReplyDelete
  110. My question is related to the clarification on Work Contract , Sales tax and VAT on a Joint Development Agreement . The basic background is
    a) there is a JT dev Agreement between owners and builder under which owners will get 60% share of constructed area + Rs.10lakh. The total land area cost as per the ready reconer is approx Rs.400lakh
    b) The Builder will handover the finished flats to owners in 36mts and the owners will thereafter transfer proportionate share of land to the builder
    c) the owners will not be selling their part of the flats and will be using for their own use for the time being and the builder also undertakes not to sell the flats till they are completed.
    d) the total cost of construction for the entire project is approx Rs.200 lakh
    e) the current market selling price of whole constructed area is Rs.1000 lakh based on the Stamp duty value for this project

    The agreement will be signed next month and I understand that there can/shall be the following tax related outgoings to the OWNERS
    i) Income Tax (ii) Service Tax (iii) Work Contract Tax (iv) Stamp duty on registration document (v) VAT

    QUES 1: What will be the tax liability for Service Tax/ Work Contract Tax and VAT to the Owners/ Developers in the above case and how they will be calculated assuming that Owners are Individuals and Developer is a Pvt Ltd company registered in ST and VAT

    QUES 2: What should the owners do to protect themselves from the above tax liability of the same has to be fulfilled by the Developers? The owners have already mentioned that all tax liability for the project incld STax, VAT, Work Contract etc shall be to owners account

    I look forward to your feedback on this and if possible a calculation of the actual tax liability. txs

    ReplyDelete