Priyaranjan Kar (Accountant) 23 July 2011

Works Contract service

Company-Pappu take contract from Raju for erection of tower. For this he bifarcrate contract into two parts. One for supply 2nd one for erection. Under supply contract he supply tower parts and under erection he do erection work relating to tower including assembling of all these supply material. Suppose total contract value is 100 out of which Rs. 70 is for supply and Rs. 30 (Considering rs10 service and Rs20 of cement, Rod, Sand & Bricks etc. Material cost) used in erection. What amount of ST he will pay . He is register in state under work contract service and paying duty only on erection contract value material used cost that is Rs. 30/-. as 4% of erection contract value. As the material of tower parts supplied under supply contract is from differect state he is paying 2% CST on that. Then what is liablity it will have when he will be considered for work contract service under Service tax because it will be catagories under WCS w.e.f 2007. What amount of ST he will pay . Please explain

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3 Replies

Anil Duggal (Service) 26 July 2011

Dear Priyaranjan

It is better that contractor pay service tax on the full site work vaule so the cotractee takes CENVAT of the same.

AASHISH CHAUHAN (MANAGER- INDIRECT TAXATION) 06 August 2011

In the said contract, if the contractor wish to discharge the service tax under compostion scheme i.e. @ 4.12% then in that scenario service tax need to be discharged at full contrcat value { 4.12% of Rs.100} . This provision came on 7th July 2009 on insertion of an explanation under Rule 3(1) of Works Contract (Composition Scheme for Payment of Service Tax) Rules 2007.