How to determine value of service portion in the execution of a works contract.
|
Related Act and Section – Section 67 of the Finance Act, 1994 |
|
Relevant Rule – Rule 2 A of Service Tax (Determination of Value) Rules, 2006 |
|
Notification - Notification No. 24/2012 - Service Tax dated 6th June 2012 |
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.
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)
Amount which will include the value of Works Contract Service
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
viii. Profit earned by the service provider relatable to supply of labour and services
here 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.
here the value has not been determined on the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract. (As above), 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:-
|
Nature of Works Contract |
Percentage of the total amount* charged on which Service Tax Shall be Payable |
|
|
A |
works contracts entered into for execution of original works* |
40% |
|
B |
works contract entered into for maintenance or repair or reconditioning or restoration or servicing of any goods |
70% |
|
C |
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 |
60% |
|
*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;] |
|
*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: |
The fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.
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.
*The information is for general awareness and may not be relied upon for any legal purpose. Views are personal. Author shall not be responsible for any loss or damage, if any, in any manner whatsoever.
http://gstjournal.in/files/documents/Works-Contract.pdf
Rabish Chandra
(contact @rabishchandra on twitter)
CAclubindia
