Service tax on labour component on vat (under work contract)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 July 2012 hello

i am register dealer of delhi vat act under work contract.
under a work done use both material and labour. so i segregate as 60:40 ratio as a general practice how to calculate service Tax on labour part. ie

Total work done 1000

Material 600
Labour 400
-----
1000
=====
Vat @ 12.5 % on Rs.600 75
Service Tax on Rs.600
@12.36% 74
----
Total amount 1149
====

Now the rule of Service Tax Change, how Calculate

help me

RENGARAJ R.K

RENGARAJ R.K (Expert)
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19 July 2012 The working shown above can be taken for service tax purpose.

The new provision for calculation of service tax for works contract is:

1) Material cost shown in the VAT return can be claimed for deduction.
2) Therefore, from the total cost minus material cost is the taxable turnover under service tax act. If material cost could not be separately shown, then 40% of the total value should be taken for paying service tax.

Moreover under reverse charge mechanism, 50% of the service tax is to be paid by service provider and 50% by service receiver. So, kindly calculate your service tax liability as per law.