Work Contract

[Samik Chaudhuri]

Sir

We are manufacturing Co. Our contractor raises various Bill for Earth cutting, Tripper Hiring Charge, Civil Works. I would like to know whether we have to pay total service tax 12.36% on Bill value for Earth cutting or 40% of Bill value for Civil Works. Please suggest me.

With thanks and regards

Samik Chaudhuri.

[MAHENDRABHAI DESAI]

If you have entered with your contractor a single contract for civil works then all the services provided becomes works contract service and he has to charge you on 40% of his work.

He has to charge service tax on 40% of his bill + free material supplied by your co. + free consumables like water elect. supplied by you.

Again if you are pvt. ltd or ltd co and he is individual or partnership firm then he has to charge only 50% of service tax in his bill and balance 50% is to be paid by you under reverse charge.

AI Summary

Works contract service: single civil contracts attract deemed taxable value and reverse charge may shift liability to the recipient.
If a single contract covers civil works, the entire supply is a works contract service and the supplier computes tax on the deemed taxable portion of the gross bill; the taxable base must include value of materials and consumables supplied free by the recipient. Where the recipient is a company and the provider an individual or partnership, the receipt-based reverse charge mechanism requires the recipient to discharge the balance of service tax not charged by the provider.