Save Rs 499. Go Ad-Free with CAclubindia Pro for 2 Full Years. Subscribe Now!

WCT Service

Service Tax (Legacy) 748 views 1 replies

Sorabh Gupta

Manager ( Taxation )

877 Points Posted on 28 October 2009

Dear All

As my query is regarding Work Contract Services.

Take an example.

Like a contractor "Z" makes a contract of construction with materials & labour & Z has registered him in service tax act under "WORK CONTRACT SERVICE"

Z raise a bill & claim abatement of 67% of gross value.& mentioned the service category i.e. "WORK CONTRACT SERVICE" on the bill.

My question is that if you could readt the WORK CONTRACT SERVICE , no abatement is mentioned only the compostion scheme is mentioned. But ib CONSTRUCTION SERVICE abatement is mentioned ie.e 67%.

But contractor Z shows that he himself registered under the WORK CONTRACT SERVICE the how could he claim abatemen.

But one thing that i would like to mentioned that if you go thru the WORK CONTRACT SERVICE , one thing is mentioned in this service that OVERLAPPING OF SERVICE .........But i didn't under stand that

So please giver your opinion.

Replies (1)

Prashant Bhosale

Manager Direct Tax

135 Points Posted on 28 October 2009

Works contract means contract for material and labour. In the said caegory there is transfer o goods as well as services to the customer. Hence the works contractor is liable for VAT and service tax both. However, there should not be double taxation on same value. To avoid this double taxation the state vat act permits abtement for labour ( % as per the category of works contract) and balance is liable for vat. Similalrly abatement is allowable under sevice tax . This is available to the works contractor who cannot bifurcate the value of material and service componant . If one can bifurcate the material and service component then he can pay tax i.e. vat on material & ST on services accrodingly.

The same logic is applicalcable on all the other works contract