tax rate applicable on WCT

This query is : Resolved

Bipin Mahale (Querist)
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15 December 2009 One of supplier is giving the service of refilling painting labeling of fire extinguishers & is charging VAT & Service tax as follows :

Total Bill Value 5250.00
12.50% VAT
(on 75% of 5250) 492.19
4.12%Service Tax
(100% of 5250) 216.30
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Gross Bill Amt 5958.49
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My query is if supplier is calculating VAT on 75% of 5250, that means 25% is the service involved & service tax should be calculated on 25% of 5250.00. Please clarify.

SARATHY RP

SARATHY RP (Expert)
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16 December 2009 This is a works contract. As per the local VAT norms, there is an abatement of 25% available towards labour component. Hence 12.5% VAT on the 75% is perfect. With regard to service tax, your supplier has opted for composition method of discharge under works contracts services. Here the gross value received is taxable @ 4.12% and CENVATable. Hence this is also perfect. If the contract value is quite significant, further tax planning is possible considering the full rate of 10.30% service tax and output VAT of 12.5%.

Thanks.
Sarathy

Bipin Mahale

Bipin Mahale (Querist)
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16 December 2009 Many Thanks Sir for your prompt solution.

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