20 November 2013
I have a query regarding the liability of payment of service tax. Here is an example.
Mr A is a builders and developers company.
Mr B is construction contractor.
If Mr.A is giving a construction contract to Mr.B for Rs.1000 per square feet to build a residential complex with materials and labour. Then Mr.B will charge Mr.A service tax on what amount? ?
Mr.A will b selling under construction units to buyers and he will collect service tax from them @3.09% of the agreement value.
Can Mr.A adjust the Service tax he has already paid to Mr.B for construction contract and pay the balance to the Service tax department.
20 November 2013
Part1: The services provided by construction contractor falls under works contract. As per the valuation rule 2A where it is not possible to determine the value of service portion and value of goods seperately then value of service is determined as per Rule 2A(ii) i.e. the alternate method. In your case,service tax shall be levied on 40% of the original work value .Also while making payment of the same you cannot take credit on inputs received. Therefore Mr B shall charge service tax on 60% of Rs 1000/- per square feet.
Part2: Yes Mr A can adjust the service tax already paid to Mr B for construction contract.
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