Vat charged On Repair job by Automobiles repair workshops in delhi

[Pramod HP]

The automobile repair workshops charge Vat on 80% of Total labor charges charged by them. having a plea that the total repair job consist of 80% Material cost & 20% Labor cost, as well charge 13.1236% Service tax (Consolidated) on total labor charge on 100% labor charge. they both are imposed on the labor charge.

Whereas One Car manufacturer's Dealers charge Service tax on 70% labor charge,and Vat on 80% of labor charge.

For Explanation 

TOTAL LABOR CHARGE: 1000

VAT ON 80% @12.5%: 1000*80/100*.125=100

SERVICE TAX ON 70%OF TOTAL LABOR CHARGE= 1000*70/100*.1236=86.52

TOTAL LABOR CHARGE INCLUSIVE OF TAXES =1186.52

Can any one update with new rule that has come not to charge vat on Labor charge.

Please elaborate

Regards

Pramod HP

[YAGAY andSUN]

The authorized service station has charged the appropriate rate of tax on this transaction under DVAT Act and Service Tax laws (Finance Act, 1994).

VAT is applicable on the Goods, therefore no VAT/CST will be leviable on the Services Provided during the WCT.

AI Summary

VAT applicability on services clarified: VAT applies to goods, not to services provided during work contracts. Workshops commonly allocate portions of labor charges for taxation, charging VAT on 80% of labor and service tax on 70% of labor; the respondent states VAT targets goods and thus VAT/CST will not be leviable on services provided during work contracts, while service tax applies to the service component under central law.