how to compute service tax in case composite contract and karnataka vat

[manju nath]

Dear Experts,

 

We are registered Private Ltd Company holding Vaiid Karnataka VAT Registration and Service Registration Number.

We got a composite work order for AC AMC for Rs 50000/-( which is inclusive of labour and material supply). Under Karnataka VAT Act we have been paying Karnataka Vat on 30 percent of Rs 50000/- at the rate of 14.5 percent which worked out Rs 2175/- Now my query is will Service Tax payable after abatement of 70 percent on Rs 35000/-- 0r 32825 which (35000-less 2175/-).

Request to clarify will service tax payable on Rs 35000/-

or after deducting vat of Rs 2175/-                   32825/-

 

Regards,

c.k.manjunath

 

 

 

 

[Rajesh Nathoo]

Dear Mr. Manju,

Levy of Service Tax and VAT are independent . You need not pay on 70 percent of 50000, you need to pay only on 40 percent of 50000, i.e. 20000 at the rate of 12.36 percent . You cannot deduct VAT from 20000 as the amount 50000 is already exclusive of Service Tax and VAT.

[Mukesh Shah]

Hi Manjunath, 

As per Service Tax (Determination of Value) Rules, 2006, Rule 2A (ii)(B), maintenance of AC will be liable at 70 percent value of gross amount charged. In your case, Service Tax liability is on Rs. 35000/-. ie., Rs. 4,326/-

[manju nath]

Thank you for reply.

[manju nath]

Thank you for reply.

AI Summary

Service tax on composite contracts taxable after prescribed abatement; VAT cannot be deducted from the service tax base. For AC annual maintenance contracts invoiced inclusive of materials and labour, service tax valuation follows the Service Tax (Determination of Value) Rules, 2006, Rule 2A(ii)(B), which applies the statutory abatement to determine the taxable portion of the gross amount; VAT charged under the State Act is independent and is not deductible from the service tax taxable value when the invoice is exclusive of service tax and VAT.