Service tax on new furniture contract

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 December 2015 I have entered in to new furniture works contract(including material and labour) of new constructed building.

I have registered under works contract service. So what is the rate of tax applicable to me ?

Prakash Mundada

Prakash Mundada (Expert)
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02 December 2015 if material portion seperately available in VAT records then total amount charged - material portion-vat amount is the service portion on which 14% + .5% of Swach Bharat Cess is to be levied

If material portion is not available then on notional basis
if original works then 40% of Total Amount Charged
if other than original works then 70% of Total amount charged is liable for Service Tax @14% + 0.5% of SB Cess

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Querist : Anonymous

Querist : Anonymous (Querist)

03 December 2015 Here is the explanation of Original Works
(i) all new constructions;
(ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;
(iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether prefabricated or otherwise;

If i select notional option (labour cant be separated)
So what is the rate of service tax is applicable i.e. 5.8% (40% taxable) or 10.15% 70% taxable).

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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24 July 2025 Here's a clear breakdown for your furniture works contract service tax as of December 2015:

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### Scenario:

* **Works contract includes both material and labour**
* You are registered under **Works Contract Service**
* Material portion **cannot be separated** from the bill

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### Tax calculation based on "Original Works" definition:

**Original Works** includes:

* All new constructions
* Additions/alterations to abandoned/damaged structures to make workable
* Erection/commissioning/installation of plant, machinery, equipment, or structures

If your furniture contract falls under **Original Works**, then:

* **40% of total amount charged** is treated as the **taxable service value**
* Service tax rate: **14% + 0.5% Swachh Bharat Cess (SBC)** = **14.5% effective rate**
* So, service tax = 40% of contract value × 14.5%

If your furniture contract does **not** qualify as original works (like repair, maintenance, renovation), then:

* **70% of total amount charged** is taxable service value
* Service tax at 14.5% on this 70%

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### Your question about rates:

* **5.8% (which is 40% × 14.5%)** applies if your contract is for **Original Works** (i.e., new furniture in new building)
* **10.15% (which is 70% × 14.5%)** applies if it is **not Original Works** (like repairs or renovation)

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### Summary:

| Type of Work | Taxable Portion | Service Tax Rate | Effective Tax Rate on total amount |
| ---------------------------------------------- | --------------- | ---------------- | ---------------------------------- |
| Original Works (new furniture in new building) | 40% | 14% + 0.5% SBC | \~5.8% |
| Other Works (repair, renovation) | 70% | 14% + 0.5% SBC | \~10.15% |

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If the material portion is separately available and VAT is paid on it, you exclude the material portion + VAT from the taxable value, and service tax applies only on the service portion.

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**So for your case (new furniture works contract in new building), if labour and material can't be separated, you apply 40% of total value as taxable service portion and pay service tax @14.5%.**

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If you want, I can help you with an example calculation!

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