Mode of discharge

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Pawan Agarwal (Querist)
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04 December 2011 Case: i am using some material in work contract service which is purchased from subcontractor and incorporated in work. The contract with customer is in such a way that i am not able to bill the value of above material separately. customer is paying service tax on full contract value under Erection and commissioning Service.

1.During execution of Erection and Commissioning service some material is transfer directly to customer.

Question
1.whether i have to discharge the vat tax liability on such material as transfer of property in goods directly to customer.

2.if yes then the value on which i have to discharge the vat tax liability.

3.Can i used Notional profit of my business to discharge the vat tax liability.

4.If yes, then can i take input credit of VAT paid on purchase of material and only tax liability on notional profit is to be discharge.

5.Any reference in which the Method of discharging the vat tax liability on notional profit has been mentioned

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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11 December 2011 Mr. Pawan Agarwal,
You are doing a work contract,doing a part yourself and engaging a sub-contractor also.You will get exemption on labour,sub contarct payment,and the establishment expences.The profit you get is to be apportioned to subcontract payment ,labour,expences,and material.You have to pay VAT on the value of material+profit. The other items +their profit are exempt.Your client need to pay service tax on the value other than material only.Both service tax and VAT do not apply on the same transaction.
MJK

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