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Service tax vat applicability for contractors

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ramakrishna

Accounts Manager

21 Points Posted on 21 November 2013

Dear sirs,

I have a doubt regarding the input tax credit of Service tax paid to Subcontractors. I will explain u in detail as follows:

I am working for a ABC construction company at Hyderabad in Andhra Pradesh

we had given a construction contract to XYZ subcontractor.

we are collecting service tax @ 3.09% from customers,

my doubt is that if we pay Rs.1,00,000/- + taxes to XYZ subcontractor on 21.11.2013

what is the Service tax and APVAT implications and how i can file returns to the departments, and can i get the input for the taxes paid to XYZ.

subcontractor demanding 4.944% of Service tax, how can i pay this amount to him.

please helpme out

Replies (1)

CA Kanagaraj R

CA CS & CWA

89 Points Posted on 22 November 2013

Service tax on works contract (construction works) is applicable At 4.944%. Therefore the sub-contractor's claim of service tax is correct. Provided pls ensure that the sub-contractor is a corporate entiry, if not he has to charge only 2.472% (i.e., 50%) and balance 50% has to be paid at your end.

Understand under construction of complex you are remitting servicce tax @ 3.09%.

You can avail cenvat credit of service tax paid to the sub-contractor.

As regards APVAT, if the sub-contractor is doing works contract the liability to pay VAT is with the sub-contractor and main contractor need not pay any further taxes on the value of sub-contract, once again. [Therefore, the sub-contractor portion can be claimed as exemption by the main contractor]. Refer caselaw: 17 VST 1 (SC)