Is VAT applicable on Service tax ?

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Kiran

Accounts Manager

24 Points Joined April 2009

Our nature of work is fixing of Aluminium Windows and Facade work (i.e Structural Glazing, ACP Cladding). Kindly guide me which of the below option is correct for making our Invoice under composition scheme of works contract:-

Option 1 Rs.

Basic 100.00

+Service Tax @ 4.12% on 100 (Inc. 3% Cess) 4.12

+MVAT @ 5% on 100 5.00

_____

Total Contract Value 109.12

=====

Option 2 Rs.

Basic 100.000

+Service Tax @ 4.12% on 100 (Inc. 3% Cess) 4.120

______

Total 104.120

+MVAT @ 5% on 104.12 5.206

_______

Total Contract Value 109.326

=======

Kindly advice which option we can opt if possible please provide the MVAT Act notifications for the same.

Regards

Kiran Pandya

Replies (4)

Sachin

Chartered Accountant

419 Points Joined November 2008

Dear Kiran,

Both Options are wrong because one thing may be either service or goods. please bifurcated the basic and charge MVAt on Goods part and Service Tax on labour part. write me mail for further clarification sachinagarwalcallb @ gmail.com

PRADEEP D PATANGE

CA-Fresher-Service

110 Points Joined May 2008

Option 1 is right

Mahesh

63 Points Joined September 2007

As per my understanding option II is correct.

Mr. Sachin has pointed out that either ST or MVAT, which is also correct, that is tru in normal course of business. Whereas the situation given is for Works contract under Service Tax hence both ST and VAT will be applicable.

ST will be chargeable as mentioned above. only question of VAT, whether it should be charged on value + ST or Value only. However, it is accepted principle under VAT, that VAT is leviable on value + (Excise duty /Service Tax).

It would be advisable to check valuation rules under MVAT in this regard.

Sandeep Jindal

Student

31 Points Joined December 2008

Hi Kiran

this is Sandeep here,

In my opinion either both the services should be bifurcated otherwise it should be cover under work contract tax.If u bifurcate it then service tax on the value of service provided and VAT on the value of goods is applicable for further reference write me on j.sandeep6323 @ gmail.com