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Service tax on works contract


Please clarify certain doubts regarding taxation of works contract service. My company is  providing works contract service relating to maintenance workS and commercial construction to clients. Also we are registered under VAT as works contractor and are paying works contract tax under Kerala Vat at 3%. While raising our invoice for clients we are showing the gross value which is inclusive of VAT.

Again as per the new amended rule in service tax, there is an abatement of 60% on original works if we are opting for composition scheme and other maintenance work there is an abatement of 40%. My question and doubt is that for calculating  the service tax payable, should we remove the vat component from the Gross value(since the gross value is inclusive of Vat) and calculate the service tax after providing the abatement of 60%/40% or should service tax be calculated on total gross value inclusive of vat. Please note that we are paying service tax under composition scheme. At present I am raising the invoices by calculation taxes  in the following manner.  Please verify and state if it is correct


Gross Value of Contract(inclusive of Vat)                                           Rs 100000.00

Gross Value of Contract(Exclusive of Vat- 100/103 X Rs100000) Rs   97087.38

Value for Service Tax ( Rs97087.38 X 40%)                                       Rs  38834.95

Service Tax @ 12%( 50% of (12.00% of Rs 38834.95))                  Rs    2330.10   (Under Reverse mechanism 50% share)

Education Cess @ 2% of Rs 2330.10                                                Rs       46.60

SHEC @ 1% on Rs 2330.10                                                                Rs        23.30

Total Payable( Rs100000 + Rs2330.10+46.60+23.30)                  Rs  102400.00

Please give expert opinion on above and whether the calculation has to be changed in future.

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The current working sheet is correct.  The service receiver has to pay 50% under reverse charge if only the service provider is individual or firm, which please note. Better show the VAT on works contract after the service tax working but vat is to be paid only on the basic value ie., 97087.00.  

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We are a Private Limited Company manufacturing note books mainly to schools.

Problems regarding Service tax

a)   Three groups of people are working with us where we are paying them on piece rate basis for job/ lamination. The total outlay is Rs. 2.5 lakhs to Rs. 3.00 lakhs /months.

At present, we are deducting TDS on the payment made to them.

 Whether we are coming under the preview of Service Tax as we are receiving services and if the service provoder is not a company then whethr this liability wud come on aur shoulder?

and whethr d service provider wud get the exemptn limit of 10Lacs?

Chartered Accountant

If it is a printing job work , then exemption is available as per noti. 25/2012 item no. 30. Otherswise tax is attracted. If then , it is pure labor contract and then entire tax to be paid by the serice provider. This is not manpower supply.

Total likes : 1 times


okay,... thanks a lot sir,.. would it make any difference if the service provider is not a company but an individual or firm?

and the entire tax paid by the service provider for services which are nt printing, whether they would got thw exemptn LIMIT of 10 Lacs?





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