Works contract and service tax

In case of Works Contract, if we apply Rule 2A
Value of Service= Gross Amount charged (excludingVAT) - Value of Property in goods transferred on which VAT/Sales Tax is paid

Service tax to be charged on this value.

In case you opt for Presumptive basis, 

Service tax shall be payable as per the applicable rate on 40% of the Total Amount charged for Works contract
Total Amount= Gross Amount charged +FMV of goods & services supplied - Amount paid by the Service Provider for such goods & services - VAT/Sales Tax

For further clarifications, please feel free to contact.

What should be the treatment if we give composite contract to the vendor.

The TDS deduction on VAT is a presumptive deduction and dealer can apply for refund while filing his return.

If 100 is value of contract then TDS where applicable could be Rs.4.  service tax depening on the option choosed would apply as under:

1. Pay ST after deducting value of goods involved @ 14.5 on balance. ( documentary proof for value maybe necessary)

2. Pay ST on R. 40 ( 40% of Rs. 100) @ 14.5% if it is original works. or

Pay ST on 70 ( 70%) @ 14.5 if it is not original works.

Note: Where VAT is charged in the invoice then the ST need not be paid on the VAT part.