Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, January 5, 2015

WORKS CONTRACT SERVICES TAXABLE AND EXEMPTED UNDER SERVICE TAX ACT

DETERMINATION OF VALUE OF SERVICE PORTION IN THE EXECUTION OF A WORKS CONTRACT.
Notification No. 24/2012-S.T., dated 6-6-2012 read with Rule 2A Subject to the provisions of section 67 and 66E(h) of the act

DIVISIBLE WORKS CONTRACT
INDIVISIBLE WORKS CONTRACT
In case indivisible works contract
Value of service portion in the execution of a works contract shall be determine in the following manner:-
In case indivisible works contract
Value of service portion in the execution of a works contract shall be determine in the following manner:-
A) Gross amount charged (excluding VAT and Sales Tax) paid or payable


B) LESS Value of property in goods transferred in the execution of the said works contract
(Value of property = value taken on which VAT and Sales tax paid or payable)

(A)  in case of original works, service tax shall be  payable on forty per cent. of the total amount charged for the works contract;
           
(B) in case of works contract, not covered under sub-clause (A), including repair or maintenance, reconditioning or restoration, or finishing servicing of any goods, installation of electrical  fittings of an immovable property etc. service tax shall be payable on seventy percent. of the total amount charged for the works contract;
Value of works contract service shall include, -
      (i)   service, labour & other similar charges
      (ii)  charges for planning, designing and     architect’s fees;
      (iii) hire charges for machinery and tools
(iv) cost of consumables and cost of establishment of the contractor relatable to supply of labour and services;
      (v)profit earned by the service provider relatable to supply of labour and services;

For the purposes of this rule,-
(a)   “original works” means-
        (i) all new constructions; and additions/ alterations to on land that are required to make them workable;
(ii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;
 (d)  “total amount”
gross amount charged for the works contract Add:- fair market value of all goods and services supplied in relation to works contract, whether
Less: the amount charged for such goods or services and VAT or sales tax paid or payable
         

CENVAT As per CENVAT Credit Rules, 2004 , CENVAT on Capital Goods and input services shall be available except duties or cess paid on any inputs ( Goods or Material Consumed ) , used in or in relation to the said works contract

WORK CONTRACT SERVICES EXEMPT FROM SERVICE TAX
Notification No.  25/2012-Service Tax dated 20th June, 2012
12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of
(a)    a civil structure meant predominantly for  use other than for business or profession;
(b)   a historical monument, archaeological site or remains of national importance
(c)    a structure meant predominantly for use  as  an educational, a clinical, or  cultural establishment; 
(d)   canal, dam or other irrigation works; pipeline, conduit water supply or water treatment or sewerage treatment or disposal; or
(e)    a residential complex predominantly meant for self-use or the use of their employees
13.  Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of
(a)       a road, bridge, tunnel, or terminal for road transportation for use by general public;
(b)      a civil structure or  any other original works pertaining to a National scheme
(c)       a building owned meant predominantly for religious use by general public;
(d)      a pollution control or effluent treatment plant or a structure meant for burial or cremation of deceased;
14. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-
(a)    an airport, port or railways, including monorail or metro;
(b)   a single residential unit
(c)    low- cost houses up to a carpet area of 60 square metres per house in a housing project approved Government of India;
(d)   post- harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or
(e)    mechanised food grain handling system, machinery or equipment for units  processing  agricultural produce as food stuff excluding alcoholic beverages;

29. Services by the sub-contractor providing services by way of works contract to another contractor    providing  works contract services which are exempt


Contributed BY CA RAHUL SINGHAL

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