11 May 2016
To the best of my knowledge, Works Contract Services under Finance Act 1994 (as amended) is subject to tax at either 40% of the invoice amount or 70% thereof depending on the nature of the contract. Further by notification 26/2012, in case the contractor is an individual or partnership firm (not LLP) and the service recipient is a body corporate, then the service recipient is liable to pay 50% of the duty directly to the Government under Reverse Charge Mechanism. Therefore if the above condition is satisfied, then you are liable to charge only 2.90% or 5.08% of the total invoice amount. However if the contractor is a body corporate then the liability would be 5.80% or 10.16% depending on the nature of the contract. I am not aware of any provision that permits charging of 6.1% of the Works Contract Invoice.
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