Works Contract Service

[Asked by Guest]

Dear Sir,

Please explain us whether Service provider can charge Service tax 50% i.e 7% on full value and 50% under not any category i.e 40% or 70% of works contract service i.e 7% service tax liability of us as a Service receipent. Therefore please explain us whether he has rightly charged. Pls give us any references regarding this. Thanks & regards.

[Ganeshan Kalyani]

The service tax liability of service provider on works contract service is 50% and balance 50% is payable by receiver of the service. Let me explain, in case of original works contract service the service portion in value of contract is 40% and in case of other than original works is 70%. The service tax shall be calculated as - 40% of value of contract and on that 14% service tax and on 50% is payable by service provider and balance 50% by service receiver.

Dear Sir,

Thanks for your reply, but if the Service provider is not considering any 40% or 70% of works contract service. In case of AMC He is just charging 50% of 14% i.e 7% his Service Tax portion and balance 50% of 14% i.e 7% Service tax rate to be paid by us as service receipent.Therefore please explain us whether it is correct. He is not charging any Vat.Thanks & Regards

[vasudevan unnikrishnan]

For AMC tax on 70% of gross value need be paid.Even in case ,where service provider has not charged so,as service recipient, you can follow this valuation and 50% of that only to be paid under reverse charge.payment in cash,not by cenvat. Credit can be taken also.

AI Summary

Works contract service reverse charge: recipient must pay its share when supplier fails to charge, AMC uses higher service valuation.
Works contract services attract a split service tax liability under reverse charge: the service portion of contract value varies by type (original works lower; other than original works including AMC higher), tax is computed on that service portion, and where the supplier does not charge tax the recipient must adopt the standard valuation and pay its reverse charge share in cash while claiming input credit as permitted.