Works contract

Works contract is a kind of quasi sale and service.

There is some part of material involved and major labour charges.

Some examples shall be fabrication, job working for big cos like L&T , Triveni Engg. etc.

What is the rate of Service tax on work contracts. Is it 4 % on gross turnover or 10% on 33% of gross turn over if it is not possible to account for exact material and labour component.

Rate of service tax for WCS is either 4.12% on gross amount charged for service provided or 10.3% on value determined under rule 2A of service tax determination of value rules, 2006. The rate of 10.3% on 33% value is not under WCS but for construction of complex if value of land is not included in the gross amt chgd.

Please refer to point number A, B & F in the file attached below, for clarification of  doubts on Works Contract Services.

Point No. F on 'Clarifications issued by the Board' may be helpful to all.

Duty under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 is charged @ 4% presently. (4.12% inclusive of cess)

As rightly pointed out by Harsha, 67% abatement is available on Commercial or industrial construction service(Section 65 (105) (zzq) of the Finance Act, 1994) & Erection, commissioning or installation services (Section 65 (105) (zzd) of the Finance Act, 1994).

Can you elaborate Erection, commissioning or installation services ? What services are covered under this head?

Can you elaborate Erection, commissioning or installation services ? What services are covered under this head?

Erection, Commisison or Installation services mainly covers the E/C/I of any machinery , plant or appliances. It is important to note that if the service involves the supply of material , it shall be calssifiable under WCS. If it is a contract involving pure labour, it shall be classifiable under 'EC/I' Please refer Section 65(39a) of Finance Act for type of services covered.