Service Tax on Works contract

Labour Component in works contract is 33% of Works Contract.

Service Tax @ 12% should be paid on aforesaid Component %

Effectively it results in 4%+Surcharge+Edn. Cess

No CENVAT Credit allowed, in case this method is being followed.

The procedure for the payment of service tax on receipts by builders may depend on the method of contracting and method of accounting.

Assuming that there is an agreement to sell and another for construction and builder has a system of accounting for the first receipts towards land consistently.

Then once the land recepits are completed the amounts would be allocated for construction services. Here the rate at which ST is payable would depend on the options choosen. Assuming that the same is composition scheme 4.12% is the final rate. The recepit may also include VAT. In this case we have assumed VAT is nil. Therefore the receipt is inclusive of ST.

The receipt is to be divided by 1.0412 and multiplied by 4.12%. This would give the ST payable. From this ST payable the cenvat credit on the capital goods and the input services would eligible as deduction.

good education and clear discussion.