Taxes for work contracts

Service tax is payable on the value of works contract after deducting value of goods from the gross value. The gross amount included will not include value added tax and sales tax. The value of works contract shall include:

Labour charges
Amount paid to sub-contractor for labour and other services
Planning and designing charges
Charges for Machinery and tools taken on rent/ hire
Profit earned by the supplier for supplying labour and other services.
Service tax is payable at composite rate on:
40% of the value of the original work (original work will include all types of new construction, alteration or additions made to damaged structures).
since the work undertaken relates to "original works" service tax is to be charged on 40% portion, hence contractor is correct.

Hai harshal totla once can you clarify my doubt that what is that 75% related to? And the service tax wil it be chargable only on 40% of work? What does WCT mean?

14.5% is the sales tax /vat which is payable to state govt

75% is related to "total value of contract". Service portion in execution of works contract is a declared service under service tax and it is chargeable on "service portion only", 40% in this case(relating to original works). WCT means works contract

So here he is leaving that 75% and he is charging serivce tax 15% on only 40% of work am i right?

So here he is leaving that 75% and he is charging serivce tax 15% on only 40% of work and remaining % is for charges as u explained am i right?

Sri Harsha, kindly understand that both WCT tax and service tax are separate levies under different statutes. WCT tax is leviable on "works portion" and service tax is leviable on "service portion" in am manner laid down under respective statutes.

Yeah i have seen the list where u've mentioned so allo those will cover under WCT and on remaining % the service tax will be now am i right pls?

WCT tax will be on 75% of total value of computed as per respective provisions and service tax is levied on 40% of value of contract computed as per respective provisions. As simple is that. Do not make any correlation between these two levies.

Originally posted by : Sri Harsha
	Yeah i have seen the list where u've mentioned so allo those will cover under WCT and on remaining % the service tax will be now am i right pls?

 

Agree with reply of Harshal Totla

 

Regards

Karanjit Singh | +91-7503588224

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