service tax on construction activity

[MAYUR DODIYA]

Which method for payment of service tax should be applied where a construction activity is eligible for abatement at the rate of 75 percent on gross value? In other words if gross value of Rs.1010 (Rs.10 included towards VAT) inclusive of all is paid by customer as full consideration, should we pay service tax on Rs.250 at the rate of 12.36 percent by 'forward calculation' or should we pay service tax on Rs.250 by 'back calculation' ?

[Madhukar N Hiregange]

The abatement of 75 percent is when the value includes the value of land. Therefore 250 is inclusive of ST. Backward calculation would be appropriate.

AI Summary

Clarification on service tax calculation for construction: Use backward calculation for Rs.250 after 75% abatement, VAT included. A query was raised regarding the appropriate method for calculating service tax on construction activity eligible for a 75% abatement on the gross value, specifically when the gross value is Rs.1010, including VAT. The question was whether to apply service tax on Rs.250 using a forward or backward calculation. The response clarified that since the abatement applies when the value includes land, the Rs.250 is inclusive of service tax, and therefore, a backward calculation is appropriate.