Service tax / VAT on works contract

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 June 2010 We provide scientific consultancy services at Hyderabad. we provide maps using satellite data after necessary image analysis using our technical domain knowledge.

Our input is satellite data purchased from ISRO, Government of India and output is maps derived from satellite data and a report containing details of analysis.

Is VAT applicable to us? If so at what rate?

Is Service Tax applicable to us? If so at what rate?

How to segregate the contract value for VAT and Service Tax purposes?

If compound rate of service tax on total gross value is opted, does it mean 4%VAT + 4% Service tax on gross value?

e.g. if input satellite data cost is Rs.2,00,000 and total contract value is Rs. 3,50,000 what are the options available.

Based on the reply from Mr. Ramesh Krishnan, shall we charge VAT on the input material i.e. 2,00,000 in the above example and service tax on the balance amount i,e, Rs. 1,50,000?

What is the VAT rate applicable in Andhra Pradesh for this job? Please clarify as we are thoroghly confused.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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29 June 2010 Wherein the sales Material and labour is indivisible or cannot be segregate then the Works contract will apply, I think in your case is Material and labour totally clear.so Material portion VAT as applicable rate and Labour portion Service tax 10.30%

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Querist : Anonymous

Querist : Anonymous (Querist)

29 June 2010 The query is revised. Please resolve.

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Shyam Lal Naik

Shyam Lal Naik (Expert)
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30 June 2010 In my view, the job does not fit into the definition of Works Contract either under the VAT law or Service Tax law.

In terms of VAT law, there shall be transfer of goods involved in the execution of works contract whether as such or in some other form. Is data goods ? Whether the extended meaning of sale provided in Clause (29A) of article 366 of the constitution applicable in this case ? The answer to both is no.

In terms of Service tax, only specified contracts are treated as works contract. It might fall under any other category of Service tax, not under Works Contract.