Sir,
My clent is coming under the works contractor and he is collected the service tax from the 40% of original value. this is the correct one (or) again we will deduct any percentage to calculate. please clarify.
K.RAJA (Tax Consultant) (217 Points)
28 March 2014Sir,
My clent is coming under the works contractor and he is collected the service tax from the 40% of original value. this is the correct one (or) again we will deduct any percentage to calculate. please clarify.
JAINENDRA JAIN
(ACS/CA)
(1668 Points)
Replied 28 March 2014
if this is orignal contract than service tax is payable on 40% of total amount charged for works contract.
as if 12.36% of ( 40% of total amount)
DINU SUKUMAR
(Audit Manager)
(176 Points)
Replied 28 March 2014
Yes. He is liable to collect and pay ST at 4.944% of the original value.
JAINENDRA JAIN
(ACS/CA)
(1668 Points)
Replied 28 March 2014
however reverse charge mechanism will operate and 50% of service tax liability will be paid by service provider and 50% by service reciver.
Option 1
ST can be charged at 12.36% only on total labour amount (if shown seperately in invoice). Reverse charge is applicable only if your client is an individual/HUF/partnership firm/AOP & the service receiver is body corporate/company.(50% of ST liability to be paid by your client & 50% by service receiver)
Option 2
Service tax can charged on 40%(execution of original works*) or 70%(repair/maintenance/servicing of goods contract) or 60%(remaining contracts) of the total invoice value(material + labour) at 12.36%. Reverse charge is applicable only if your client is an individual/HUF/partnership firm/AOP & the service receiver is body corporate/company.(50% of ST liability to be paid by your client & 50% by service receiver).
*Meaning of Original Works-all new constructions; all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise.
Dishank
(Article)
(55 Points)
Replied 28 March 2014
Sourabh Singhania
(Article Assistant)
(30 Points)
Replied 29 March 2014
Akshay Garg
(Indirect tax trainee)
(457 Points)
Replied 29 March 2014
payment under erverse charge has to be made at 40%
Accounting Home Services
(Finance Executive )
(733 Points)
Replied 31 March 2014
REVERSE CHARGE MECHA IT MEAN
HERE IS SERVICE TAX LIABLITY SHARE BOTH RECEIER & PROVIDER ALSO
IF PROVIDER CHARGE ON 40% SO RECIVER SHOULD PAY ON 60% GOVT WANT 12.36% ON 100% INVOICE VALUE
Akshay Garg
(Indirect tax trainee)
(457 Points)
Replied 07 April 2014
as per rule 2A of the Determination of value of Service rules 2006 the service tax shall be payable either by calculating value of contract minus value of goods exigible to sales tax or vat and remaining to be treated as service and service tax shall be paid thereon or otherwise the value can be 40% of the gross amount charged. There can be both the possibilities in case the goods and services are divosbel u may take value as per goods and services respectively.
Also under notificatio 30/2012 both the service recepient and the service provider are under the liabilty to pay reverse charge in case the service provider is individual or huf or association of person to a body corporate else no liabilty under reverse charge would arise.
Live Course on Python for Financial Analysis: Unlocking Efficiency in Accounting and Finance
CAclubindia
