we have started new partnership firm, here we will be doing construction activity .
for our project we have give contract with material for the construction of apartment he will be providing us COT bill against Vat & also Service Tax
so please inform weater we have to register both Vat & Service Tax & What % of Vat(in Karnataka) & Service Tax & also inform how to maintain Accounting System
As i understand, you are involved in the construction activity where the work is sub contracted to another contractor. As both material and labour is provided by sub contractor, it would amounts to works contract on which service tax and VAT both are levied. There are two option - 1. Composition scheme - Service tax is to be charged on 40% of the total bill amount @ 12.36% since it pertains to original work as per valuation rule 2A of service tax (determination of value) rules,2006. 2. regular scheme - Payment of service tax on actual value Rule 2A of Service Tax (Determination of Value) Rules, 2006.provides that Value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. Referred valuation rule.
Here, no joint charge charge mechanism is applicable as you are a partnership firm and a firm is not a body corporate. In case of works contract, joint charge mechanism applicable when the service receiver is a business entity registered as body corporate as per notification no. 30/2012-ST.
If you want to claim the cenvat credit of the input service, one has to registered under service tax.
Accounting entry - when invoice bill paid - expense a/c...............dr. cenvat credit a/c....dr. to cash/bank A/c.
When making any payment of service tax after availing Servcie Tax Credit
Service Tax A/c Dr. To cenvat Credit a/c To Bank A/c
VAT valuation a. Under Regular Scheme (Actual Labour): Deduct the actual labour, service and like charges, which are ascertainable from records in terms of Rule 3(2)(l) of KVAT Rules 2005 and pay VAT on balance at 14.5% on the actual value of materials transferred during the course of execution of the contract. If opting for this, records should be strong. b. Under Regular Scheme (standard deduction): Deduct a standard rate as set out under Rule 3(2)(m) of KVAT Rules 2005. Presently VAT is payable on 70 % of the value of the contract. c. Composition scheme: The dealer would be liable to VAT at 4% on the gross amount of the contract. The input tax set off is not available in this option.
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