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

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.