Sevice Tax On Interior Services

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 January 2010 We provide interior decorator services to our clients. In our bill, we charge a gross amount from our customers and we don't differentiate between the service portion and the Material portion. We pay service tax as follows:

Amount Liable to Service Tax = Gross Sales - Purchases

Are we correct?
Are we liable for VAT also?

Please help..

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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29 January 2010 Liable for VAT for materials transferred. Choices: Composition ( if conditions fulfilled); On part of material value pay VAT ( after availing input VAT credit)
Under Service Tax.
Options: Compistion 4.12% or on value offerred for VAT take deduction pay ST on balance.

Querist : Anonymous

Querist : Anonymous (Querist)

29 January 2010 Sir in our Bill to Client we dont mention the material Portion. The Bill is of a gross amount including Material and services.

Please suggest..

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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25 July 2025 Got it, you provide **interior decoration services** and your bill is a **composite bill** — no separate breakup between **service** and **material** — and you want to know about:

* Correctness of your **service tax computation** (Gross sales – Purchases)
* Your **VAT liability**

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### 1. **Service Tax on Interior Decoration Services**

* Service tax is levied **only on the value of services**, not on the value of goods/materials supplied.

* When you issue a **composite bill** (lump sum including materials and service), you need to **determine the value of service portion** to pay service tax correctly.

* The usual method allowed is:
**Value of service = Gross amount charged – Cost of materials actually purchased and used in providing the service**

* So your method:
**Amount Liable for Service Tax = Gross Sales – Purchases**
is **generally correct**, provided:

* Purchases are only of materials used in providing service
* You have proper documentation to substantiate the material cost.

* If you are not separately mentioning the material portion in your bill, it is still okay for service tax purposes if you maintain proper records of material purchases.

* You can also opt for the **composition scheme** (if applicable) paying service tax at a fixed % (earlier 4.12%) on gross amount without deducting material cost.

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### 2. **VAT Liability**

* VAT applies on the **sale of goods/materials** transferred to the client.

* Since you supply materials (even if on a composite bill), VAT is applicable on the **material portion**.

* You need to either:

* Pay VAT on material value after availing input VAT credit, or
* Opt for composition scheme under VAT if conditions are met (this varies by state).

* You should maintain records of material value separately for VAT compliance, even if you don’t show this separately in your bill.

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### **Summary:**

| Tax Type | How to compute | Notes |
| --------------- | ------------------------------------------------- | --------------------------------------------------- |
| **Service Tax** | Gross amount billed – Cost of materials purchased | Maintain proper purchase records for materials |
| **VAT** | On material value portion supplied to client | Separate accounting needed; VAT applicable on goods |

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### **Advice:**

* Even if you don’t show the breakup on the bill, maintain proper internal records showing material costs and service value.
* Consider amending your bills to show material and service separately to avoid confusion and help your clients claim input credits.
* Consult a tax advisor for VAT compliance in your particular state.

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If you want, I can help draft a sample bill format that splits service and material portions while maintaining your billing style. Would that help?

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