Notification 15/2012

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 May 2012 In case of a Construction contract entered with the party, the party is covered under the composite scheme and collects service tax @ 4.95%. in such case as per notification 15/2012 of service tax, what shall be our liability and how it shall be calculated?

Querist : Anonymous

Querist : Anonymous (Querist)

31 May 2012 Plz reply

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2024 **Notification No. 15/2012-Service Tax** deals with the service tax liability in respect of construction services under the composite scheme. Let’s break down the key details and how they affect your service tax liability in the given scenario.

### **Understanding Notification No. 15/2012-Service Tax**

**1. **Composite Scheme:**
- Under the composite scheme, construction service providers are required to pay service tax on a reduced value of service provided, which effectively reduces their service tax liability.

**2. **Notification No. 15/2012-Service Tax:**
- This notification specifies that for construction services, the service tax liability is calculated based on a certain percentage of the gross amount charged.

**3. **Effective Service Tax Rate:**
- Under Notification No. 15/2012, the effective service tax rate is applied on the value of taxable services after considering the abatement provided.

### **Calculation and Liability:**

**1. **Abatement and Effective Rate:**
- **Abatement Provided:** For construction contracts, Notification No. 15/2012 provides an abatement of 75% of the value of the service. This means that service tax is payable only on 25% of the value of the service.
- **Effective Service Tax Rate:** The service tax rate is 12% on the taxable value. After applying the 75% abatement, the effective service tax rate becomes 3% of the gross value of the service provided.

**2. **Scenario Analysis:**
- In the scenario where the party is covered under the composite scheme and collects service tax at 4.95%, it indicates that the party is applying a rate that seems to be based on the composite scheme provisions but at a higher rate than the abated effective rate.

**3. **Your Liability:**
- **Service Tax Calculation:** Given that the construction service provider collects service tax at 4.95%, you should verify if this rate includes the composite scheme abatement. If it does, the calculation for the effective service tax liability should align with the 3% effective rate as per the abatement under Notification No. 15/2012.
- **Verification and Adjustment:** Ensure that the collected service tax (4.95%) aligns with the statutory requirements. If the rate collected exceeds the effective rate, you may need to adjust the liability or seek clarification from the service provider to ensure compliance.

### **Summary:**

1. **Effective Service Tax Rate:** Under Notification No. 15/2012, the effective service tax rate for construction services is 3% of the gross amount charged (after a 75% abatement).

2. **Collected Service Tax:** If the service tax is collected at 4.95%, verify if this is correctly aligned with the statutory provisions. The amount collected should reflect the reduced effective rate if it includes the abatement.

3. **Liability Verification:** Check with the service provider to ensure that the service tax collected complies with the prescribed rate under the composite scheme and Notification No. 15/2012.

**Consultation with a Tax Professional:** Given the specifics of tax compliance and potential variations in interpretations, consulting a tax professional or advisor can help ensure accurate calculations and adherence to legal requirements.

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