Though there is hair thin difference between the two, let me put it as: Service will be taxable under the head ‘Works contract’ if the specific contract is works contract on which VAT is payable. Contract will remain service contract if either no material is involved and if involved then VAT is not payable.
Secondly, for levy of service tax, government has distinguished these services as per section as: “Works contract”, as per the section 65(105)(zzzza), while for "Construction of Residential Complex" as per Section 65 (105) (zzzh) of the Finance Act, and "Construction Commercial and Industrial Service" as per Section 65(25b) of the Finance Act etc.
As the rates of abatement also differ as per the different type of services, its better to choose correct option available.
For more clarification advised to refer: 1. F. No. B1/16/2007-TRU dated 22.05.2007.
2. https://www.luthra.com/admin/article_images/service-tax.pdf