26 October 2012
Services like GTA, Works Contract are covered under Reverse charge and also have Abatements.
For example, Works contract has abatement of 75% and reverse charge is 50% partial charge. So should the service recepient pay 50% partial x 25% (after 75% abadement) x 12.36% of value of bill or 50% x 12.36% on total bill without abatement?
Someone said we have to pay 50% x 12.36% of total bill.
26 October 2012
First depending upon whether the wc service is original work, maintenance, etc the value of service portion ranges from 40% to 70%. Suppose bill is 100, and it pertains to original works i.e. 40%.
ST payable by service recipient:= 100X40%X12.36%X50%
27 October 2012
I will try to explain it in simple words
1. First you have to make valuation of service portion in works contract and findout total service tax liability. For that you have different options as under
a. Actual Value of service Calculate value of service on costing plus profit basis deduct value of material on which State Vat is paid, if State Vat is paid on actual value of material (and not under composition scheme) and pay service tax on balance amount
This case Service tax will be 'Actual Value of Service x 12.36%
b. Finding value of service as above in case of composite contract like works contract is very difficult.In such cases you can use composition scheme
Value of service = Gross amount charged x % prescribed under composition scheme
Service Tax liability = Value of service x 12.36%
2. Next findout the service tax liability of service provider and service receiver
ST liability of service provider will be 50% of service tax liability calculated ie, in case of (a) above = Actual ValueX12.36% x 50%
in case of (b) above = Gross amount charged x % prescribed under composition scheme x 12.36%x50%
ST liability of service receiver will be same as above
31 October 2012
That the abatement is available to the service recipient is clearly discerned from the clarification stated in the Guidance Note in relation to question on partial reverse charge wherein in the reply regarding valuation of works contract the following is stated --the liability of the service provider and service recipient are different and independent of each other, the service recipient can independently avail or forego an abatement or choose a valuation option depending upon the ease, data available and economics.
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