Works contract- rcm-service tax or vat???

Yes it is correct method. Service tax will be charged on service portion only.

Originally posted by : CA Pintu Mishra
	Yes it is correct method. Service tax will be charged on service portion only.

Is it not covered under RCM under works contract?

eg.

Invoice Value rs. 1 lac

Service amount Rs. 60000/-

Material Rs. 40000/-

Vendor Liablity

Tax computation:- Rs. 100000*12.36%*40%*50%= Rs. 2472/-

Or suggest as per your computation...

the calculation which you have given is when you opted for composition scheme. In composition scheme we do not tax on service portion only we have to pay service on whole amount and in composition scheme only 40% of gross value is taxed 60% is abatement. 

@ ajay after 01/07/2012 works contract service definition expanded to include works contract service done for the immovable property as well. So when we opt for composition scheme we have 3 rates on which we pay service tax after abatement.

1- @ 40% when works contract is related to original contract ie related to immovable property construction, insatalltion at site etc.

2- @ 70% when works contract is related to immovable property such as motor reparing where tranfer of goods is included.

3- @ 60% when other than these two.

In your case you the bill is taxed at 40% of total amount means it under original work contract related to immovable property...

Under reverse mechanism if the service receiver is a body corporate then it is liable for the 50% of service tax amount and 50% is paid by service provider.