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

Reverse charge applies to work contract services, with recipient liable for part of service tax while contractor collects balance. For new construction work contracts where materials and labour cannot be segregated, the taxable value is determined by applying the prescribed allocation to the contract price. In such cases, invoices that include subcontractor-provided details are acceptable. Under the reverse charge framework, the recipient of the taxable service must discharge its portion of the service tax liability while the service provider may collect the remaining portion on the invoice, after computing the taxable base using the prescribed allocation.