23 April 2009
Fact: A limited company engaged in providing Tower Installation Services by using certain materials which are ultimately transfer to the contractee.
As the installation service includes the transfer of property in goods, the company is charging VAT @ 12.5% on 80% of the Gross Amount Charged (Including Material) according to the provisions of DVAT. As per DVAT provisions 20% abatement will be available in case of composit work contract.
Further, the company is charging Service Tax after availing 67% Abatement under notification 1/2006 i.e. service tax is charged on 33% of the Gross Amount Charged.
By following the above procedure, company is paying tax (both VAT and Service Tax) on 113% of the gross amount charged.
Query: Can the company pay Service Tax on balance 20% of the Gross Amount Charged by following the Notification No. 12/2003 or Rule 2-A of the Service Tax (Determination of Value) Rules 2006, rather than paying service tax on 33% of the gross amount charged.
28 April 2009
But the 80% value taken in DVAT is not the actual valuation of the material portion. Even though the 80% value can be taken as value of material or actual value of material will be taken under 12/2003. Kindly Confirm
30 April 2009
this type of transaction covered under both taxes i.e. VAT and Service Tax. in the present case there is a composit works contract, hence as per Delhi VAT laws, you are rightly dischasrging VAT after availing standard deduction i.e. @20%. But, as service tax is concern; before introdusing works contract category this type of cotracts were not taxable under commissioning & installation category but after that i.e. in the preasent situation this type of contracts are covered under category 'service tax on works contracts' and there is no standard abetment/ dudctions are prescribed hence you are liable to pay service tax subject to notification 12/2003.
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