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Changeability of Service tax and VAT
owners of building going in for addition and alteration of area of their flats.(addl. fsi) thru works contract to a civil Contractor. Do the owner need to pay service tax and vat if yes then at what rates. the contracts present quotation states VAT @ 8% on gross value and ST @ 10.5%. He says he had charged on composite basis which we think it would be wrong as vat should be charged on materials & goods and ST on labour services. Please advice a proper right way out.Tks.
Replies (2)
There are 2 ways:
- If service portion can be ascertained, then levy ST on service portion and charge VAT on goods at applicable rates
- If service portion cannot be ascertained, then ST is levied on 70% of the contract value (i.e. @ 10.5%) and VAT can be levied @ composite rates which may be state specific.
For more details on ST, refer rule 2A of Service Tax (Determination of Value) Rules
so solution ended with 5% vat and 6% ST for original works contract.
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