Service Tax Basic Exemption

[HIMANSHU SHAH]

Dear Sir,

Receipts of Works Contract Service during the year = ₹ 30,00,000/-

Which of the following method should be used for calculating service tax liability

1. (30,00,000-10,00,000) x 40% x 12.36% = 98,880/- or

2. [(30,00,000 *40%) - 10,00,000 ] x 12.36% = 24,720/-

Kindly guide in this matter at earliest if this is first year of business.

Thanks.

AI Summary

Guidance on Works Contract Service Tax: Correct Calculation Method Reduces Liability from 98,880 to 24,720 Under Valuation Rules. A participant in a discussion forum sought guidance on calculating service tax liability for a works contract service with receipts totaling 30,00,000. Two calculation methods were proposed: one resulting in 98,880 and another in 24,720. Initially, the first method was suggested, but it was later corrected to the second method. The correction was based on valuation rules stipulating that only 40% of the works contract value is taxable, and the basic exemption should be deducted from this taxable value, leading to a liability of 24,720.