Dear Sir,
Consider a case, a work contract is awarded to contractor for construction office building in which cement and steal are free issue material by employer and other material are in the scope of contractor. Please suggest tax applicable for such Work Contract.
Regards
Sudhakar Sinha
Service Tax Rules 2006: Employer-supplied materials included in contract value; options for tax calculation and Cenvat credit explained. A query was raised regarding the tax implications on a work contract for constructing an office building, where cement and steel are provided by the employer. The response clarified that under the Service Tax (Determination of Value) Rules, 2006, the value of the works contract includes various charges and the cost of employer-supplied materials like cement and steel. The service provider has two options for paying service tax: calculating the value of services alone or using a composition scheme. Sales tax or VAT must be paid separately on goods transferred during the contract execution. Cenvat credit is available for input services and capital goods in both cases, but not for duty paid on inputs. (AI Summary)
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