Works contract
This query is : Open
15 December 2011
DEAR ALL PLS GUIDE ME ON WORKS CONTRACT
ONE OF MY CLIENT IS DOING A CONSTRUCTION WORKS WITH MATERIAL HE IS RECEIVING A DIRECT CONTRACT FROM BUILDERS SO WHAT % OF SERVICE TAX & VAT SHOULD WE CHARGE TO BUILDER AND CAN WE GET CENVAT CREDIT OF SERVICE TAX TO SUBCONTRACT GIVEN BY US
PLS PLS GUIDE ME
ONE OF MY CLIENT IS DOING A CONSTRUCTION WORKS WITH MATERIAL HE IS RECEIVING A DIRECT CONTRACT FROM BUILDERS SO WHAT % OF SERVICE TAX & VAT SHOULD WE CHARGE TO BUILDER AND CAN WE GET CENVAT CREDIT OF SERVICE TAX TO SUBCONTRACT GIVEN BY US
PLS PLS GUIDE ME
15 December 2011
FOR THE SERVICES TAXABLE UNDER THE HEAD WORKS CONTRACT SERVICES U/S 65 (105)(zzzza) following provisions shall be applicable:
OPT FOR COMPOSITION SCHEME
1. VALUE OF TAXABLE SERVICES
Value of all goods (including FOC)+ value of all services -vat or sales tax -cost of machinery and tools used for execution of work.
(As per explanation of rule 3 of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007)
2. CENVAT CREDIT MAY BE TAKEN OF
1. Input services
2. Capital goods
But cenvat credit cannot be taken of
Input and goods involved in execution of work. (As per Rule 3 (5) of CENVAT Credit Rules 2004, input removed as such)
The CENVAT credit of tax paid on taxable services as referred to under sub-clauses
(zzd), (zzq) and (zzzh) of clause (105) of section 65 of the Finance Act, 1994, shall be available
only to the extent of 40% of the service tax paid when such tax has been paid on the full value of the service after availing CENVAT credit on inputs.
(WEF 01.03.11)
3. RATE OF SERVICE TAX
4.12%
NOT OPT FOR COMPOSITION SCHEME
1. VALUE OF TAXABLE SERVICES
Gross amount charged – value of goods – sales tax/vat
(As per rule 2A of SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006)
2. CENVAT CREDIT MAY BE TAKEN OF
1. Inputs
2. Input services
3. Capital goods
But cenvat credit cannot be taken of goods involved in execution of work.
(Circular No. 96/7/2007-ST dated 23.08.2007 as amended by circular no 98/1/2008-ST dated 04.01.2008)
3. RATE OF SERVICE TAX
10.30%
As far as VAT is concerned in respect of works contract, you have the option to pay VAT under composition scheme or under normal provisions as above as per respective State VAT law.
List of Services Specified Under Rule 2 (l)(ii)(A) of CENVAT Credit Rules, 2004
1. Port Services [65 (105) (zn)]
2. Port Services in other port [65(105)(zzl)]
3. Air Port Services [65(105)(zzm)]
4. Commercial or Industrial Construction Services [65(105)(zzq)]
5. Construction of Complex Services [65(105)(zzzh)]
6. Works Contract Services [65(105)(zzzza)]
7. Architect’s Services [65 (105) (p)]
If the above services are used for the
(a) construction of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods
then these services shall not be considered as input services and accordingly CENVAT credit shall not be allowed. In other words, if the above services are used for provision of services other than construction etc in clause (a) & (b) then they shall be included in the definition of input services and accordingly CENVAT credit shall be taken.
On the basis of above analysis you can take the right decision.
If u r satisfied by my reply then say thanks by clicking on "THANK USER".
OPT FOR COMPOSITION SCHEME
1. VALUE OF TAXABLE SERVICES
Value of all goods (including FOC)+ value of all services -vat or sales tax -cost of machinery and tools used for execution of work.
(As per explanation of rule 3 of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007)
2. CENVAT CREDIT MAY BE TAKEN OF
1. Input services
2. Capital goods
But cenvat credit cannot be taken of
Input and goods involved in execution of work. (As per Rule 3 (5) of CENVAT Credit Rules 2004, input removed as such)
The CENVAT credit of tax paid on taxable services as referred to under sub-clauses
(zzd), (zzq) and (zzzh) of clause (105) of section 65 of the Finance Act, 1994, shall be available
only to the extent of 40% of the service tax paid when such tax has been paid on the full value of the service after availing CENVAT credit on inputs.
(WEF 01.03.11)
3. RATE OF SERVICE TAX
4.12%
NOT OPT FOR COMPOSITION SCHEME
1. VALUE OF TAXABLE SERVICES
Gross amount charged – value of goods – sales tax/vat
(As per rule 2A of SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006)
2. CENVAT CREDIT MAY BE TAKEN OF
1. Inputs
2. Input services
3. Capital goods
But cenvat credit cannot be taken of goods involved in execution of work.
(Circular No. 96/7/2007-ST dated 23.08.2007 as amended by circular no 98/1/2008-ST dated 04.01.2008)
3. RATE OF SERVICE TAX
10.30%
As far as VAT is concerned in respect of works contract, you have the option to pay VAT under composition scheme or under normal provisions as above as per respective State VAT law.
List of Services Specified Under Rule 2 (l)(ii)(A) of CENVAT Credit Rules, 2004
1. Port Services [65 (105) (zn)]
2. Port Services in other port [65(105)(zzl)]
3. Air Port Services [65(105)(zzm)]
4. Commercial or Industrial Construction Services [65(105)(zzq)]
5. Construction of Complex Services [65(105)(zzzh)]
6. Works Contract Services [65(105)(zzzza)]
7. Architect’s Services [65 (105) (p)]
If the above services are used for the
(a) construction of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods
then these services shall not be considered as input services and accordingly CENVAT credit shall not be allowed. In other words, if the above services are used for provision of services other than construction etc in clause (a) & (b) then they shall be included in the definition of input services and accordingly CENVAT credit shall be taken.
On the basis of above analysis you can take the right decision.
If u r satisfied by my reply then say thanks by clicking on "THANK USER".
21 December 2011
DEAR ALL PLS GUIDE ME ON WORKS CONTRACT
ONE OF MY CLIENT IS DOING A CONSTRUCTION WORKS WITH MATERIAL HE IS RECEIVING A DIRECT CONTRACT FROM BUILDERS SO WHAT % OF SERVICE TAX & VAT SHOULD WE CHARGE TO BUILDER AND CAN WE GET CENVAT CREDIT OF SERVICE TAX TO SUBCONTRACT GIVEN BY US
ONE OF MY CLEINT CHARGING THE SERVICE TAX @ 3.43 % UNDER WORKS CONTRACT I.E 1/3 OF 10.30% IS IT CORRECT, ON THE BASIS OF EARLIER CALCULATION 1/3 OF 12.36% I.E 4.12%
PLS GUIDE ME
THNX IN ADVANCE
ONE OF MY CLIENT IS DOING A CONSTRUCTION WORKS WITH MATERIAL HE IS RECEIVING A DIRECT CONTRACT FROM BUILDERS SO WHAT % OF SERVICE TAX & VAT SHOULD WE CHARGE TO BUILDER AND CAN WE GET CENVAT CREDIT OF SERVICE TAX TO SUBCONTRACT GIVEN BY US
ONE OF MY CLEINT CHARGING THE SERVICE TAX @ 3.43 % UNDER WORKS CONTRACT I.E 1/3 OF 10.30% IS IT CORRECT, ON THE BASIS OF EARLIER CALCULATION 1/3 OF 12.36% I.E 4.12%
PLS GUIDE ME
THNX IN ADVANCE
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