Valuation of works contract in service tax

Others 2207 views 3 replies

vaibhaw aggarwal

Manager Finance & Accounts

29 Points Joined July 2009

Hello Friends,

You are all aware of the paradigm changes made in Service Tax Regim from 01.07.2012 onward upon introduction of Negative List , widening the scope of Reverse Charge and Change in defination of Works Contract and Valuation Rules.

I am here inviting your valuable comments on Determination of Value of Works Contract under new provisions.

For Determing Service Portion in execution of Works Contract Specified % of abatement(40/60/30) will be allowd on "Total Amount" and As per Rule 2A (d) " Total Amount" of Notification No. 24/2012 Service Tax ,(Determination of Value Rules, 2012)- "Total Amount" includes- "Fair Market Value of all goods and service supplied in or in execution of works contract"

Now the question arise what will be considered as goods or service supplied?

For Example if the service(which involves some material of service provider and hence becomes works contract service) is done on material purchared by the company whether the value of material purchased by the company will be added to the amount paid to the service provider for arriving at the "Total Amount"?

Please post your views.

Regards,

CA Vaibhaw Aggarwal

Replies (3)

CA Unnikrishnan Nair N

Chartered Accountant

2083 Points Joined February 2011

The defnition of total amount charged is confusing. Pl. read para.8.2.5 of Education guide issued by CBEC, in which this has been illustrated.

vaibhaw aggarwal

Manager Finance & Accounts

29 Points Joined July 2009

Originally posted by : CA Unnikrishnan Nair N
	The defnition of total amount charged is confusing. Pl. read para.8.2.5 of Education guide issued by CBEC, in which this has been illustrated.

Sir,

Even para 8.2.5 of education guide does not clarify the type of material used in the execution of works will be added for the purpose of valauation.

For example -1. Whether the value of material used in relation to Works Contract which were brought after paying VAT/CST will be added or not?

2. If a steel struture is to be dismanteled and erected at another place whether the steel will be considered as the material used in or in relation to the execution of works contact and hence require adding its FMV?

selvan

Manager commercial

35 Points Joined August 2011

Dear Mr. Unni krihsnan

thanks for the feed back, I have one more query

For example in copier industry machine will be maintained by the distributor, consumable and spares will be supplied ( under per copy rate contract ) earlier use to do 70 % of the total value ( copies taken * rate per copy) will be taken for VAT calculation towards material and 30 % of the value taken for service rendered - is the same can be adopted - pls update..

selvan