Service Tax Basic Exemption, Service Tax

[HIMANSHU SHAH]

Dear Sir,

Receipts of Works Contract Service during the year = ₹ 30,00,000/-

Which of the following method should be used for calculating service tax liability

1. (30,00,000-10,00,000) x 40% x 12.36% = 98,880/- or

2. [(30,00,000 *40%) - 10,00,000 ] x 12.36% = 24,720/-

Kindly guide in this matter at earliest if this is first year of business.

Thanks.

Posts / Replies

[Deepak Aggarwal]

Dear Himanshu ji,

In my opinion, first method will work- (30,00,000-10,00,000) x 40% x 12.36% = 98,880/-.

Thanks

[Deepak Aggarwal]

Dear Himanshu ji,

Please ignore earlier reply. Correct position will be as per second method i.e. [(30,00,000 *40%) - 10,00,000 ] x 12.36% = 24,720/-. Reason is that works contract service is covered by valuation rules. Valuation rules specifies that only 40% will be taxable value in case of Works contracts. So, first taxable value will be calculated and then basic exemption will be deducted.

Hope it will clarifies.

Thanks