Maharashtra vat on service tax - works contract

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bhandarea

21 Points Posted on 21 December 2013

Facts of the Case - We are a construction company operating in Maharashtra. For VAT we had opted for composition scheme. In VAT assessment , Assessing Officer is asking for VAT on Service Tax portion also.

E.g.

Our Invoice


Basic Amount	100
Add – VAT @ 5% on 100	5
Add – Service Tax @ 4.12% on 100	4.12
Gross Amount	109.12

Invoice – As per Assessing Officer Stand


Basic Amount	100
Add – VAT @ 5% on 100	5
Add – Service Tax @ 4.12% on 100	4.12
Add- VAT on Service Tax – 5% on 4.12	0.206
Gross Amount	109.326

Our stand is ,

1. We are showing Service tax & VAT separately in Invoice.

2. Service tax is not an expenses for us but it is recovery of tax on behalf of Government. So the question of adding it in sale price should not arise.

3. VAT is on transferring the property in Material involved in works contract, However Service tax is on Labour portion. So it should not form part of sale price for calculating VAT.

Que –

1. Whether it is justifiable to charge Tax on Tax, i.e. VAT on Service Tax.

2. Whether the stand taken by Assessing Officer to charge VAT on Service tax is Correct? , with reason.

3. Whether there will be any impact if Contract is inclusive of all taxes & Contract excluding taxes.

4. Whether VAT is payable on “ Service tax paid on Free Supply of Material also”

5. Any other opinion in this regard

Thanks in Advance

Replies (2)

niket

FINAL STUDENT

54 Points Posted on 23 December 2013

firstly on free supply of goods dont attract service tax so no ppint on levying vat on dat portion .

if u make contracts inclusive all taxes than u hav do a reverse calculation and calculate the tax amount , it would be not suggested as ur profit portion will contain tax portion .

and as per the best of my understanding , service tax add a monetary value to ur product so basically its an value addition thus value added tax is levied !!

and its the common practice of AO to ask for vat on service tax .

issuing labour nd material bill differently should help you to avoid tax on tax take sme suggestion on the same

Sonu Kumar

Account Manager

682 Points Posted on 24 December 2013

Dear Mr. bhandarea,

1. Vat is Payble on Service tax also.......... but while calculating service tax vat is nt considered means if contract is inclusive of taxes then gross up required then deduct wct amount and service tax calculated on balance amount.

2. Many times we deduct TDS on Amount Including Service tax...... Its Fault in Our Tax Law i Think

3. Yes.... In Case of Inclusive Taxes Gross Up is Required

4. Service tax is Payble on Free Supply of Material Also. But Not Confident about vat.