How Pay VAT & Service Tax

This query is : Resolved

ZIA (Querist)
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13 October 2009 I Am Doing My Business as Car Cleaning Services &
1. I am Purchasing A Car Cleaning Products From Global Company, With VAT @ 4%

2. With Same Products I am Cleaning the Cars for that i was charging Service Tax @ 10.3%

But My Query Is What Tax I have Charge Weather Its VAT @ 4% Or Service Tax 10.3%

In Some Cases is Like They are Charging
80 % OF VAT @ 4%
20 % OF Service Tax @ 10.3%

Eg:
Purchase
Cleaning Products 1000
VAT @ 4% 40
----
Total 1040
----
Sales
Cleaning Service 1450
Service Tax @ 10.3% 149
----
Total 1599

But IF I DO LIKE THE VAT DEPARTMENT ARE NOT ACCEPTING SO WHAT IS BETTER METHOD TO DO THE BILLING & TAX I HAVE CHARGE & AT WHAT IS PERCENTAGE PLEASE DO THE NEEDFUL & OBLIGE

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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13 October 2009 Cleaning Products purchased 1000.

and your sale price is 1450.

You can charge like this.

Product sale price 1000 + 200 = 1200 collect vat on the same 1200*4% = 48
Your liability will be 48-40 = 8.

Rs.250 bill it as service charges and collect 10.3% on the same.

You are showing a margin of 20% to sales tax and also 25% to labour charges which will be acceptable at each department.

Rajeev

Rajeev (Expert)
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14 October 2009 Its a work contract.

I think 80:20 ratio( material labour ratio) is accepted by both the departments , no issue .

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SARATHY RP

SARATHY RP (Expert)
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14 October 2009 Dear Mr Zia,

According to me, the type of work carried out by you does not fit in to a works contract. Without quoting the definitions under the Indian Constitution or from different statutes, I would like to put it in a simple manner.

To be taxable under the category of works contract, there has to be a transfer of property in goods should take place, backed by a valid consideration.

In your case, the goods have been consumed incidental to providing the service. Hence, if we apply the dominant intention of your contracts (as laid down in BSNL SC case) the service would come first than the transfer of property in goods.

Hence, according to me, you have to purchase cleaning aids under VAT or CST and it will be consumed by me. The tax paid on these transactions will be your cost and while rendering the service you have to charge applicable service tax.

Thanks.

Sarathy