Service tax & cst in single bill

Queries 793 views 5 replies

Dattatri

Tax consultant

121 Points Posted on 04 January 2016

My client has received 2 bills from their service provider/Supplier.

1St bill;.

Item Value Rs. 50880.00

CST 2% on 75% of 50880 (Rs. 38160*2%) Rs. 763.20

Service Tax on 70% of 50880 (Rs. 35616*14%) Rs. 4986.24

SBCess on 70% of 50880 (Rs. 35616*0.5%) Rs. 178.08

Total Rs. 56807

2nd Bill

Item Value Rs. 69560.00

CST 12.5% on 75% of 69560 (Rs. 52170*12.5%) Rs. 6521.25

Service Tax on 70% of 69560 (Rs. 48692*14%) Rs. 6816.88

SBCess on 70% of 69560 (Rs. 48692*0.5%) Rs. 243.46

Total Rs. 83141.59

My querry is

1. is it possible to club both service and VAT invoice

2. In both the cases, out of 100, 75% considered for VAT and again 70% is considered for Service Tax. Effectively 70% of total value has attracted 14.5% on first case (2%cst+14% Serv tax) & 26.5% in second case (12.5% CST+14% Serv tax) and 25% of total value has not been considered either for VAT or Service Tax. how is this possible?

Suppose 75% of total value is material then VAT has to be collected on 75% of the value and Service tax needs to be collected only on 25%. is it not?

Can anyone help me to understand?

Replies (5)

CMA Poornima Madhava

CMA

13117 Points Posted on 04 January 2016

What is the nature of service and sale?

Dattatri

Tax consultant

121 Points Posted on 06 January 2016

Repair and maintainence service.

Supplier has billed as under

Total contract value is Rs. 100

Collected CST @ 2% on Rs. 75 i.e. Rs. 1.50

Collected Service Tax @ 14.5% on Rs. 70 i.e. Rs. 10.15

Total Bill Value is Rs. 111.65

CMA Poornima Madhava

CMA

13117 Points Posted on 06 January 2016

As per rule 2A of ST (DV) Rules 2006, where the service portion (out of the contract value) cannot be determined, then service tax is payable on 70% of the gross amount charged.
But in this case, since CST is charged on Rs.75, so I presume this is the cost of materials used in the contract and balance is towards service. If this is true, then service tax to be charged @ 14.5% on Rs.25 only

Dattatri

Tax consultant

121 Points Posted on 06 January 2016

Rule 2A of ST says for original work, ST on 40% of contract value and for repair or maintainence or reconditioning, then ST to be charged on 70% of the contract value. See the attchement marked in yellow.

Here, if v charge ST on 70% of contract value and VAT/CST on 75%, then how is it possible? since the contract value is only 100 and not 145 (70+75). if you have any case laws in this regard, please share madam.. Because CTD is saying 75:25, where in Service tax rule says 70% tax to be charged..

is this fair to collect twice tax on 70% and once on 5% and no tax on 25%

CMA Poornima Madhava

CMA

13117 Points Posted on 06 January 2016

70% concept is applicable where the contract value cannot be bifurcated between materials and labour. If service portion is known separately then service tax to be charged on such service portion only.
In this case, CST is charged on 75, it means this the value of material and hence the balance 25 is towards labour. In view of this, service tax to be paid on 25 only.
These things are clearly specified in rule 2A itself. I do not have information on case laws.