Tax on construction when not collected seperately

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Amit Shah (Querist)
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03 October 2012 In case of Builder, value of taxable service is 25% of Gross Amount Charged. If a builder bills Rs.10 lakhs and service tax is not charged separately I am following method-

Gross Amount Charged - Rs.10 Lakhs taxable Value
(25%) incl of tax - Rs.2.50 lakhs
Tax included in above = Rs.2,50,000 / 1.1236 * 0.1236 = 27501
Some assesses calculate as - Service tax rate = 12.36 % Effective rate = 12.36 *25% = 3.09% Therefore tax = 10 lakhs / 1.0309 * 3.09% = Rs.29974/- I want to know which one is correct

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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04 October 2012 The calculation done by other assessees is correct. pls read read the abatement notification very carefully which exempts the whole of the service amount from certain percentage of service tax.
The value of service is not reduced unlike in determination of value rules( eg. service tax on restaurant service, wotks contract service etc).

So abatement notification 26/2012 reduces the rate of service tax and not the value of service.
you can not reduce the value from 10 lakhs to 2.5 lakhs.
Hope it is clear now.