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Service and vat on works contract

Queries 526 views 1 replies

Hi.

I have a querry regarding works contract. 

As per service tax rules, service tax is chargable on 40%(original works)  or  60%((maintenance, repair etc)of total amount. Now, VAT is to be paid as per the relevant state act. State Vat acts usually say that mareital value is 60-70% of total contract value.

 

Now the querry I have is, suppose its a re-painting contract  and the contractor isnt providing the breakup of material and labour,

then service tax will be paid on 60% of total value

VAT will be charged on material portion as per the relevant state law- between 60-70% of total value ( assume 70% is the case here)

Then we will end up paying tax on 130% of contract value, ie Service tax on 60% and VAT on 70%. This doesnt seem logical.Im confused as to which statue to follow, the State VAT act or service tax rules.

If there are any  dept clarifications or court decisions regarding this matter, kindly let me know.

 

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