Service Tax to civil contractor
This query is : Resolved
14 February 2010
Dear Sir/Madam,
What are the taxes (e.g. Service tax, VAT, WCT, TDS etc.) applicable to a civil & interior decorator and how (tax break-up).
Two contractors (both civil and interior decoration) are carrying out their works at my office.
We are situated at Chennai, Tamilnadu
Total cost for the civil contractor is Rs.1,00,000/-
Total cost for the Interior Decorator is Rs.8,00,000/-
What type of taxes will apply to the above vendors? If the contractor provides relevant registration, the particular tax will be exempted.
I am not an accountant but for my job I need to know the procedure and calculations.
Pl. help me with some examples.
With regards
MadhuSudan
What are the taxes (e.g. Service tax, VAT, WCT, TDS etc.) applicable to a civil & interior decorator and how (tax break-up).
Two contractors (both civil and interior decoration) are carrying out their works at my office.
We are situated at Chennai, Tamilnadu
Total cost for the civil contractor is Rs.1,00,000/-
Total cost for the Interior Decorator is Rs.8,00,000/-
What type of taxes will apply to the above vendors? If the contractor provides relevant registration, the particular tax will be exempted.
I am not an accountant but for my job I need to know the procedure and calculations.
Pl. help me with some examples.
With regards
MadhuSudan
14 February 2010
Dear Madhu,
There are two ways of taxation in such cases,
1) One way to identify the Service Portion & Material Portion separately. In such case the contractor will charge VAT on the material portion & Service Tax @ 10.30 % on the service portion. The credit for all taxes paid can be taken.
2) Another way may be to go for "Composition Scheme" in such case you have to pay Service tax @ 4.12% on the total basis value & VAT also on the total basic value (For VAT rate under this scheme you have to refer VAT act of your particular state where services are being provided. I remember this rate for Maharashtra, here it is 5% of Building & 8% in other cases).
Works Contract (Composition Scheme for Payment of Service tax) Rules, 2007’ applies here. As per rule 3(2) of Composition Scheme, the assessee cannot avail Cenvat credit of inputs. Thus, the assessee can avail Cenvat credit of input services and capital goods.
Now another concern may be regarding TDS & VAT TDS. For TDS - Income tax TDS for contractor has to be deducted. For TDS VAT you have to deduct TDS @ 2% if contractor is registered under VAT Act other higher deduction @ 4% has to be made. Upto some limit this deduction is also not to be done (I remember it for Maharashtra here it is 500000)
There are two ways of taxation in such cases,
1) One way to identify the Service Portion & Material Portion separately. In such case the contractor will charge VAT on the material portion & Service Tax @ 10.30 % on the service portion. The credit for all taxes paid can be taken.
2) Another way may be to go for "Composition Scheme" in such case you have to pay Service tax @ 4.12% on the total basis value & VAT also on the total basic value (For VAT rate under this scheme you have to refer VAT act of your particular state where services are being provided. I remember this rate for Maharashtra, here it is 5% of Building & 8% in other cases).
Works Contract (Composition Scheme for Payment of Service tax) Rules, 2007’ applies here. As per rule 3(2) of Composition Scheme, the assessee cannot avail Cenvat credit of inputs. Thus, the assessee can avail Cenvat credit of input services and capital goods.
Now another concern may be regarding TDS & VAT TDS. For TDS - Income tax TDS for contractor has to be deducted. For TDS VAT you have to deduct TDS @ 2% if contractor is registered under VAT Act other higher deduction @ 4% has to be made. Upto some limit this deduction is also not to be done (I remember it for Maharashtra here it is 500000)
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