Vat & service tax in works contract

This query is : Open

Sheela V (Querist)
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28 May 2015 In case of Works Contract, a consolidated invoice is raised for VAT & Labour. The client is registered under composition scheme for VAT purposes, then Composition Tax is collected @ 4% on total contract value and paid to the Government. The actual labour is about 30% of the project value. But as per ST rules, Taxable service in case of non-original works contract is 70% of the contract value. Please suggest whether he has to collect ST only on 30% of the contract value or 70% as per ST rules.

Also Can he raise two separate invoices for labour & VAT? If so, then as per COT, tax should be collected on total consideration of the contract, which will be 100% of the contract value. Then one invoice will be 100% of contract value for COT & 30% of contract value for ST, which will impact my turnover in books. Please guide.

Kumar Gaurav

Kumar Gaurav (Expert)
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28 May 2015 Please do following things:

Option I

1)-Pay 4% VAT on 100% of contract value
&
2)- ST on 70% of contract value

Please note raising two invoices do not have any impact in relation to charding VAT/ST

Sheela V

Sheela V (Querist)
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03 June 2015 Thanks Mr. Kumar Gaurav. But as per the work order, the actual labour component is only 30% of the project which is chargeable for ST. So, charging ST on 70% will be high cost for the project. Please suggest.

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