WORKS CONTRACT

[SNEHAL SHAH]

Dear sir,

We are Manufacturing of Chemical Product . Our new Unit construction continue ( New construction ) at our another land . There is a two party providing construction services ( One main another sub contractor ) :

1) ABC CONSULTING ENGINEERS - HAVING A CONSULTING ENGG SERVICE TAX REG NO.( Main )

2) XYZ ENGINEERS & CONTRACTORS - HAVING A CONSTRUCTION SERVICE REG NO. ( Sub cont )

Both are Propritoer firm . ABC Issue Invoice with atteched invoice details [ Invoice issued by XYZ ENGG with Service tax charges Rs.100 ( construction cost ) X 12.36 percent = Rs.12.36 - Service tax ] .

Is it right way and right percentage of service tax as per above detials ?

Please guide us .

Thanks and regards,

SNEHAL SHAH

 

[A Wilson]

Dear Sir,

I have some clarification in your Query. 

• Your Company Status - Partnership Firm or Private Ltd or Ltd other, please specify?

Thanks & Regards,

A.Wilson

[SNEHAL SHAH]

Sir,

Private Limited firm .

Thanks .

SNEHAL SHAH

 

[A Wilson]

Dear Sir,

Invoice issued by the ABC Consulting Engineers with details submitted by the Sub Contractor is not a problem. That Invoice can be accepted.

But In the case of Work Contract Service, 50 percent of Service tax Liability(50 percent on 12.36 percent ) on Taxable Service should be discharged by your Company(Pvt Ltd) under Reverse Charge. Balance 50 percent may be collected by the ABC Consulting Engineers(Proprietorship) .

You may refer the Reverse Charge Notification No. 30/2012-Service Tax dated 20.06.2012 effective from 1st July 2012

Thanks & Regards

A.Wilson

 

 

[SNEHAL SHAH]

Dear sir,

Exemple No. 1 :

Contractory submit Bill :

Basic Amount : Rs.100

Service tax : 6.18 ( 50 percent of Rs.12.36 )

Total Bill Amount Rs.116.18

Exemple No. 2 :

Contractory submit Bill :

Basic Amount : Rs.100

Service tax on 40 percent ( new construciton ) i.e. Rs.40 X 12.36 percent = 4.944 : 2.472 ( 50 percent of Rs.4.944 )

Total Bill Amount Rs.102.472

Which Exemple is right . Please give your expert advise .

thanks and regards,

SNEHAL SHAH

[A Wilson]

Dear Sir,

In the case of New Construction (and unable to segregate the Materials & Labour Value), the taxable value of service is 40 percent of the Total Value.

So your Example No.2 is correct.

Thanks & Regards

A.Wilson

AI Summary

Private Limited Firm to Handle 50% Service Tax Under Reverse Charge for New Construction Projects A manufacturing company is constructing a new unit and has engaged two parties for construction services: a main contractor, ABC Consulting Engineers, and a subcontractor, XYZ Engineers & Contractors. The query concerns the correct application of service tax on invoices. A Wilson clarifies that the company, being a Private Limited firm, should handle 50% of the service tax liability under the reverse charge mechanism. In new construction cases where materials and labor values are not segregated, the taxable service value is 40% of the total value, making Example No. 2 the correct approach.