Composite Tax Scheme 4.12% or Service Tax10.30%
This query is : Resolved
09 June 2009
Dear Experts,
we are real estate developers, we are in process to give a work contract for electrical work for our residential project.
now contractor is asking for us don't issue me a two separate work order, one for supply and one for installation, contractor is saying just give me a one order and i will charge 10.30% service tax on only labour part.
now question is if we issue a one work order to contractor then as per contract rules which is common in real estate industry,we will deduct TDS & WCT form gross bill amount and contractor will claim 4.12% service tax as per composite method. then why contractor is asking that he will charge 10.30% service tax on labour part.
please suggest me what is the rules for particular contract.
which idea would be better for work as per income tax rules.
Thanks & Regards
Ravinder
we are real estate developers, we are in process to give a work contract for electrical work for our residential project.
now contractor is asking for us don't issue me a two separate work order, one for supply and one for installation, contractor is saying just give me a one order and i will charge 10.30% service tax on only labour part.
now question is if we issue a one work order to contractor then as per contract rules which is common in real estate industry,we will deduct TDS & WCT form gross bill amount and contractor will claim 4.12% service tax as per composite method. then why contractor is asking that he will charge 10.30% service tax on labour part.
please suggest me what is the rules for particular contract.
which idea would be better for work as per income tax rules.
Thanks & Regards
Ravinder
10 June 2009
HE MAY CHARGE FULL RATE IF HE IS NOT OPTING FOR COMPOSITION / ABATMENT
10 June 2009
will he charge on full amount (Supply + installation) or full charge on only installation part). if he charge on only installation part then how he will calculate what is installation amount for service tax.
10 June 2009
Contractor's request is to issue composite order, which includes supply as well as labour.
Service tax will apply to labour cost through lower rate mechanism i.e. 4.12%.
Works contract tax is a state subject and will also apply to the contract.
From developer perspective, please make a comparison for tax cost implication:
1. In case composite contract is signed.
2. In case, two separate contracts are signed.
In case of separate contracts:
1. Sales tax will apply to supply contract.
2. Service tax @10.30% will apply to labour contract.
From income tax perspective, developer has no cost implication. Developer has obligation in respect of TDS. TDS need to be deducted on contract value for composite contract / labour contract. No TDS to be deducted from supply contract.
Service tax will apply to labour cost through lower rate mechanism i.e. 4.12%.
Works contract tax is a state subject and will also apply to the contract.
From developer perspective, please make a comparison for tax cost implication:
1. In case composite contract is signed.
2. In case, two separate contracts are signed.
In case of separate contracts:
1. Sales tax will apply to supply contract.
2. Service tax @10.30% will apply to labour contract.
From income tax perspective, developer has no cost implication. Developer has obligation in respect of TDS. TDS need to be deducted on contract value for composite contract / labour contract. No TDS to be deducted from supply contract.
12 June 2009
But In case, two separate contracts are signed.
it can be create a problem in respect of Tax, because we are giving two separate contract to same party, and as per your opinion Parveen Tds will be applicable on installation part, i am agree but what about WCT-4% as per under Haryana sales tax ACT.because WCT is applicable on Supply + installation part @ 4% on gross bill value and WCT and Tds will be applicable on gross bill value because Supply and installation is doing by one party.
What to do ?????
it can be create a problem in respect of Tax, because we are giving two separate contract to same party, and as per your opinion Parveen Tds will be applicable on installation part, i am agree but what about WCT-4% as per under Haryana sales tax ACT.because WCT is applicable on Supply + installation part @ 4% on gross bill value and WCT and Tds will be applicable on gross bill value because Supply and installation is doing by one party.
What to do ?????
12 June 2009
15 June 2009
But In case, two separate contracts are signed.
it can be create a problem in respect of Tax, because we are giving two separate contract to same party, and as per your opinion Parveen Tds will be applicable on installation part, i am agree but what about WCT-4% as per under Haryana sales tax ACT.because WCT is applicable on Supply + installation part @ 4% on gross bill value and WCT and Tds will be applicable on gross bill value because Supply and installation is doing by one party.
What to do ?????
it can be create a problem in respect of Tax, because we are giving two separate contract to same party, and as per your opinion Parveen Tds will be applicable on installation part, i am agree but what about WCT-4% as per under Haryana sales tax ACT.because WCT is applicable on Supply + installation part @ 4% on gross bill value and WCT and Tds will be applicable on gross bill value because Supply and installation is doing by one party.
What to do ?????
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