Works contract

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Chandrashekhar Kulkarni (Querist)
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14 April 2013 Dear Sir,
please provide me material on works contract, definition , service tax payable on works contract under reverse charge mechanism.
Chandrashekhar S Kulkarni

CA Vikas Acharya

CA Vikas Acharya (Expert)
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14 April 2013 Definition of service (64B)(44)
In proviso it is written transfer of mere title in goods by way of sale/gift also any deemed sale u/s 366-(29A) is not taxable here.. Means vat portion not taxable only service portion taxable.
In divisible contract = only service portion taxable
in Indivisble contract =
If 366(29A) = goods portion to be calculated differently.
Others = check the dominant nature of transaction. If service dominant st.
Declared service (66 E)
Point (h). Clearly mentioned that service portion in execution of a work contract.
Negative list (66 D) Nothing Mentioned..
Mega exemption 25/2012 Entry No. 12(to govt.)/13(road/bridge etc)/14(single residential unit)/29(sub contractor to another contractor who provides exempted services)
26/2012 Abatements Nothing Mentioned..
STVR,2006 FA12, Rule 2-A,
option 1.: computation method
Value of Service = GAC-Value of property in goods
[GAC does not include Sales Tax.
a.)Value of Goods = Actual Value On which Sales tax paid/payable
b.)value of Work Contract = All contract related cost + related profit]
Option 2: abatement method
following % of total amount charged is taxable
In case of original contract 40%
In case of MRRR of any GOODS 70%
Other than above two( eg: glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property) 60%
Remaining is abatement..
Total amt charged is Gross Amt Charged +FMV of all goods & services given by SR in relation to that – Amount charged by SR for the same including vat if any. (this is done because to save s.tax SP say to SR u give all the material and service amt is less)
68(2) reverse charge Generally SP
In certain cases : Service Portion in work contract : SP 50% & SR 50%
Where SP is indi, huf , p.firm,AOP and SR is Body corporate
CCR For rule 2A explanation 2
Input Capital goods input service
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- Work Contract Meaning 65B(54): WC means a contract wherein transfer if 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 activity or a part thereof in relation to such property.
In nut shell (composite + indivisible) eg. Labour cum material contract of Repair of building/tv/motorvehicle
Eg. AMC (valuation using option2 as generally payment in advance)
when AMC of goods 70% of the Total amt charged
when AMC of Immovable property = 60% of the Total amt. charged