Work contract

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AAYUSHI KHANDELWAL

AAYUSHI KHANDELWAL (Querist)

29 June 2013 Dear sir,

please tell me about the work contract under service tax

CA Vikas Acharya

CA Vikas Acharya (Expert)

29 June 2013 WORKS CONTRACT SERVICE
AFTER 1ST JULY
Definition of service (64B)(44)
In proviso it is written transfer of mere title in goods by way of sale/gift also any deemed sale u/s 366-(29A) is not taxable here.. Means vat portion not taxable only service portion taxable.
In divisible contract = only service portion taxable
in Indivisible contract =
If 366(29A) = goods portion to be calculated differently.
Others = check the dominant nature of transaction. If service dominant st.
Declared service (66 E)
Point (h). Clearly mentioned that service portion in execution of a work contract.
Negative list (66 D) Nothing Mentioned..
Mega exemption 25/2012 Entry No. 12(to govt.)/13(road/bridge etc)/14(single residential unit)/29(sub contractor to another contractor who provides exempted services)
26/2012 Abatements Nothing Mentioned..
STVR,2006 FA12, Rule 2-A,
option 1.: computation method
Value of Service = GAC-Value of property in goods
[GAC does not include Sales Tax.
a.)Value of Goods = Actual Value On which Sales tax paid/payable
b.)value of Work Contract = All contract related cost + related profit]
Option 2: abatement method
following % of total amount charged is taxable
In case of original contract 40%
In case of MRRR of any GOODS 70%
Other than above two( eg: glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property) 60%
Remaining is abatement..
Total amt charged is Gross Amt Charged +FMV of all goods & services given by SR in relation to that – Amount charged by SR for the same including vat if any. (this is done because to save s.tax SP say to SR u give all the material and service amt is less)
68(2) reverse charge Generally SP
In certain cases : Service Portion in work contract : SP 50% & SR 50%
Where SP is indi, huf , p.firm,AOP and SR is Body corporate
CCR For rule 2A explanation 2
Input Capital goods input service
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- Work Contract Meaning 65B(54): WC means a contract wherein transfer if property in goods involved in the execution of such contract is leviable to tax as sale of goods AND such contract is
- for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any Movable or Immovable property OR
- for carrying out any other activity or a part thereof in relation to such property.
In nut shell (composite + indivisible) eg. Labour cum material contract of Repair of building/tv/motorvehicle
Eg. AMC (valuation using option2 as generally payment in advance)
when AMC of goods 70% of the Total amt charged
when AMC of Immovable property = 60% of the Total amt. charged

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