Service tax and work contract tax

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Pratap Kumar Ankamreddy (Querist)
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27 December 2014 Sir,

I have received WorK Order frm one of our client for " Supply ,Erection and commissioning of the Electrical structures including all associate works like civil works , jungle clearance, approach road formation etc.,

We have completed the everything. Now we have raised an invoice as under:

basic amount : 8 Lakhs
Tax ( WCT ) : 5% on 8 Lakhs

But our client not accepting clear WCT. advised to raise as wct-70% and Service Tax 30% on basic amount.
Note : We cannot bifurcation material cost and service cost.

How can we resolve the issue.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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27 December 2014 As you can not bifurcate material cost and service cost you have to opt for WCT at 5% and service tax on 40% on basic amount.

You have to convince your client that wct is not applicable on 70% it is only VAT is applicable, which may be at 14.50% there may not be big difference whereas you land up in paying higher tax.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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27 December 2014 It seems that client do not wants to accept as work contract since in that they need to incur additional cost as taxes. But you need to comply the relevant provision laws.

If it work contract and price cannot be segregated you need to charge Service Tax @ 12.36% after claiming rebate @ 60% under rule 2A(ii) of Service tax rules 2006

Note: If client is still not willing for treat as wholly work contract you need to modify your contract, if already there, or create new one on the their treatments

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