10 December 2008
We had received work order (civil work) worth 60 lacs. Under T&C party will pay Service Tax. Against the goods at site the party had given us advance of Rs. 7,10,505.00 after deduction of 3% WCT and 2.266% TDS.
Now my question is: Party is not paying Service Tax at the time of issuing us Advance. Party says this is advance and not payment against any bill. Service Tax wiil be paid un release of payment against any bill.
Do I have to pay Service Tax upon receipt of advance. If yes then at what rate?.
10 December 2008
You are liable to pay Service Tax on advance amount received for work order. you had to see in your work contract either u had work under civil construction service with material or work contract service then only u r able to calculate the liability of service tax. for further quary r invited on the said issue.
10 December 2008
but check ur contract that liability of service tax is to be charged as civil construction service or work contract service. as the rates of service tax in both the situation is diffrent.
11 December 2008
under civil construction work with goods tax is calculated on @33% gross value X 12.36% like Rs. 1000 is gross work including supply of goods then tax is to be calculated on Rs.330 X 12.36% = Rs. 40.78 as service tax
That under work Contract service tax has to be calculated @ 4.12% on gross amount. Rs. 1000 is gross work including supply of goods then tax is to be calculated on Rs. 1000 X 4.12% = 41.20
12 December 2008
Thanks for the advice. My next question is why one should opt for work Contract service tax instead of civil construction work. I mean what is the basic difference between the two.
16 December 2008
The option is left with the service provider. When the ST under WCS was 2% it was beneficial but at 4% from Mar 08 it is not so attractive. But Under abatement procedure you cannot avail credit on any input/services/capital goods. But under WCS you can avail credit on input services and capital goods but not on input goods. That makes it more attractive to service providers.
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