ST on works contract, Service Tax

[Mohammed Lakkadsha]

If I am executing a WCT contract liable to taxed under MVAT @ 8% of Gross Value of works contract. Since the above contract is also taxable under WCT catgof ST , I opted for option A , which leads to Gross taxale value under ST at NIL. Whether above calc is correct.

Posts / Replies

[Brijesh Verma]

No, when sales tax (MVAT) has been paid on the gross value at a particular rate even then service tax is applicable. To be more precise, payment of VAT on full amount at a particular rate (composition) would not change the transaction to a 100% sale activity. If there is an element of service also involved, then service tax becomes applicable and Rule 2A of valuation rules comes into play and reverse calculation would be done. We need few more details for a more specific answer. On the basis of available info, we have opined to the best of our knowledge.

[Surender Gupta]

You have to pay service tax on the service portion either by following Rule 2A or composition scheme. payment of 8% under composition scheme on the whole contract value is not eligible for deduction 100% from gross value and in such case, the best option would be composition scheme in which 4% is to be paid. Therefore, the views expressed by Mr. Brijesh Verma are absolutely correct.