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Applicability of VAT ON Service Tax Element

N.Kiran Kumar (Manager) (41 Points)

23 October 2009

Dear Collegues,

I am working for a hotel industry. We use to sell the Food Beverage in the conference halls

If we were selling food in conference halls, we need to pay VAT & SERVICE TAX

As Per APVATACT we were paying on the total sales ( Food Sales - Rs.100/- , vat was -100*12.5% )

As per Mandap Keeper (Service Tax Act) our liability raises to pay Service Tax after adjusting abatement i.e., (Food Sales - Rs.100/- then on Rs.60 we need to pay Service Tax)

Total Tax element was - 18.70 (12.5+6.20)..

Now the Querry was APVAT authorities stating that we need to pay vat on Service Tax i.e., on Rs.6.20*12.5% in addition to Rs.12.5/-

Please advise me in this regard.

Thanks & Regards,

N.Kiran Kumar

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2 Replies

Rajeev (EO) (54 Points)
Replied 24 October 2009

NO. VAT need not be paid on service tax element. VAT is payable on value of goods, in ur case, Food , sales value of which is Rs. 100/-. Service tax is payable on value of Service (here Rs. 60/- after adjusting abatement). VAT is on sale of Goods. Servce Tax is on sale of service. Your invoice will also show two separate taxes. I am attaching here a sample of a Car service company wherein both VAT and Service Tax are involved. This will help youunderstand better.

Attached File : 25 47 tax invoice new.xls downloaded: 602 times

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Vijay D (Finance Executive) (227 Points)
Replied 26 October 2009

Raise separate Invoices for Supply of materials & rendering of Services. Where is the need to club both activity in one Invoice?? If you are not executing any works contract then it may not be problem for you & if you are in Works Contract then follow the segrigation ratio of VAT & Service Tax as applicable in your State.