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Classification of service

795 views 4 replies

sumit sharma

CA-Service

55 Points Posted on 05 April 2012

We have given a contract for construction of a building. As per the contract, few items are purchased by us like steel & cement and few items are used by contractor himself like bricks, sand, tiles etc. Contractor raises a combine bill including his charges and material used by him.

Please advise whether this service will be falling under "Construction of Building" or "Works Contract Service".

Thanks to all in advance.

Replies (4)

Prateek Agarwal

Sr. Executive - Finance & Accounts

1732 Points Posted on 05 April 2012

It would be a Works Contract Service wherein you have an option to pay service tax under Composition Scheme @ 4.12% of the Gross Value of Service provided.

Gross Value of service provided includes cost of service + value of goods used exclusive of Local Sales Tax & VAT.

Regards

Prateek

CA.Ganesh

Practicing Chartered Accountant

308 Points Posted on 05 April 2012

Inorder to cover the service under Works Contract Service , transfer of property in goods involved in the execution of such contract is leviable to sales tax.

sumit sharma

CA-Service

55 Points Posted on 06 April 2012

Thanks Friends.

Can you please also let me know about valuation and abatement (if any) if not opt the composition.

CA Nikhil Jhanwar

CA CS

4447 Points Posted on 06 April 2012

The composition rate has been changed from 4% to 4.8% + Educ. Cess as applicable w.e.f 01.04.2012. If you does not opt for composition Scheme, then You will be entitles to deduct the value of goods transferred in the execution of works contract from gross billed amount. Effectively service tax has to be paid on service portion.