Calculation of Sales & service Tax

Construction service is a composite contract involving sale of goods and labor. Hence the VAT law of each state provides for composition scheme . As per this scheme a fixed rate is applied on the gross contract amount that does not necessitate separation of value of goods and labor. Service tax also contains composition scheme by virtue of which 4.12% of the gross contract amount is the tax. Alternatively, if value of goods and services are separable, service tax can be paid @ 10.3% of the labor while VAT is payable at the rate applicable to the goods  in each state on the value of goods.