What is the procedure for calculation of service tax in respect of receipts of a builder / promoter? What is the procedure to pay service tax under Compounding Scheme in case of works contract?
M. G. SRIDHARAN (CHARTERED ACCOUNTANT) (37 Points)
24 September 2008What is the procedure for calculation of service tax in respect of receipts of a builder / promoter? What is the procedure to pay service tax under Compounding Scheme in case of works contract?
Sathish Karunakaran
(ACA)
(614 Points)
Replied 24 September 2008
Labour Component in works contract is 33% of Works Contract.
Service Tax @ 12% should be paid on aforesaid Component %
Effectively it results in 4%+Surcharge+Edn. Cess
No CENVAT Credit allowed, in case this method is being followed.
Madhukar N Hiregange
(Chartered Accountant)
(39034 Points)
Replied 25 September 2008
The procedure for the payment of service tax on receipts by builders may depend on the method of contracting and method of accounting.
Assuming that there is an agreement to sell and another for construction and builder has a system of accounting for the first receipts towards land consistently.
Then once the land recepits are completed the amounts would be allocated for construction services. Here the rate at which ST is payable would depend on the options choosen. Assuming that the same is composition scheme 4.12% is the final rate. The recepit may also include VAT. In this case we have assumed VAT is nil. Therefore the receipt is inclusive of ST.
The receipt is to be divided by 1.0412 and multiplied by 4.12%. This would give the ST payable. From this ST payable the cenvat credit on the capital goods and the input services would eligible as deduction.
Analysis of 20 GST Notices (including 2 Appeals) and Practise on Drafting(with recording)
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
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