Works Contract Service

[Guest]

Dear Sir,

Under Works Contract Service 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

[Rajagopalan Ranganathan]

Sir,

Abatement of 49% or 70% can be availed only when the service provider pays service tax on the entire value of work contract service. If he did not supply any goods during the provision of service he will charge service tax on the entire value of the service portion of the works contract. Out of which he will pay 50% and you will pay 50% as service receiver. Therefore what is done by your service provider and you is legally correct.

AI Summary

Works contract abatement: provider must pay service tax on full contract value for abatement to apply, recipient may bear part. Abatement is available only when the service provider pays service tax on the entire value of the works contract; if no goods are supplied (as in a pure AMC) the provider must charge service tax on the whole service value. If the provider pays service tax on the full service value and the recipient is made liable under the receiver liability framework, a fifty fifty division of tax liability between provider and recipient is legally permissible.