Service tax with vat

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 June 2013 One of our Party is charging service tax on 100% value of the bill and also charging vat on 80% value of that bill. whether the pattern/law applied by them is correct or not. please provide the link.

RENGARAJ R.K

RENGARAJ R.K (Expert)
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29 June 2013 The query is not clear. Please let us know what is the service provided by the party. Since VAT working is different in each state, you have to mention in which state 80% is calculated to reply whether the pattern is correct or not.

Querist : Anonymous

Querist : Anonymous (Querist)

01 July 2013 Sir,
the service is "installation & Commissioning Service" and the party belongs to Uttarakhand

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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25 July 2025 Thanks for the update! Here’s the analysis based on your clarification:

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### Service tax and VAT on **Installation & Commissioning Service** in Uttarakhand

**1. Service Tax:**

* Service tax is **payable on 100% of the value of the service** (i.e., total bill amount).
* Installation & commissioning service is a **taxable service** under service tax law.
* The service tax rate (as of 2013) is around **12.36%** (including cess).

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**2. VAT:**

* VAT is charged on the **sale of goods** and **works contract**.
* Installation and commissioning service often involves **supply of goods + service**.
* In many states, including Uttarakhand, **VAT is levied on 80% of the gross amount** in case of works contract or combined supply (this is known as **abatement** under VAT laws).
* The remaining 20% is considered as service portion, which is outside VAT scope but under service tax.

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### So, the pattern followed by the party is:

* **Service Tax charged on 100% of the bill amount** (which is correct as per service tax rules).
* **VAT charged on 80% of the bill value** (correct as per typical VAT abatement on works contracts in Uttarakhand).

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### Conclusion:

* The pattern is **correct and legally valid** based on the laws applicable as on 2013.
* This dual tax treatment is common in installation and commissioning where goods and services are supplied together.
* The service tax and VAT are charged on **different portions of the bill** to avoid double taxation on the same value.

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### Reference:

* You can refer to the **Service Tax Law under Finance Act, 1994** for service tax on installation & commissioning.
* For VAT abatement details, check **Uttarakhand VAT Act** and circulars on works contracts and composite supplies.
* A commonly cited circular is the **CBEC circular on works contract and VAT** issued around that period.
* Also, the **Uttarakhand Commercial Tax Department** website might have relevant notifications.

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If you want, I can help find the exact circulars or legal provisions with links! Would you like that?

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