Determination of taxable value and service classification

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 January 2013 dear sir,

Our firm is registered under below mention category with service tax.
"Construction services other than residential complex, including commercial/industrial
buildings or civil structures"

We are providing construction services to our clients. All materials are being provided by them. We only provide construction services by employing our labors and machinery as per their demand.

Now our first question is that whether the cost of material provided by our clients/customers should be included in our cost to charge service tax..?
For exm.
Cost of material provided by them : Rs. 100000
Cost of service provided by us : Rs. 60000
Our profit : Rs. 10000

Now on what amount we have to charge s.t... ? Rs. 70000 or Rs. 170000. ... ?

We are providing service to pvt ltd. Under reverse charge mechanism in case of work contract service we have to charge service tax on 50% amount and on balance 50% service tax will be paid by service receiver..

But in our case as materials are being provided by service receiver, at which rate service tax should be charged? @ 12.36% or 06.18%..? If such reverse charge notification is applicable to us then whether we have to amend our s.t.2 to include work contract service..?

Please guide me friends.. Its urgent...

srinivasan

srinivasan (Expert)
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12 January 2013 In the case of works contract the service tax can be charged as per service tax determination and value rules 2A. It has a provision to determine tax on the value of service @ 12.36% on the service portion or on the 40% value (including the material used by the contractee as well as fair value of material supplied by the contractor) of the original works.

Under both the cases 50% of the service tax liability is to be charged and paid by the service provider and balance 50 % has to be paid by the service receiver.

But, from your query in my opinion what you provide is a pure service and no goods are involved and therefore your service cannot fall under the purview of works contract rather qualify as taxable service. Accordinly, the service tax @12.36% has to be collected / discharged by you.

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