Net payment calculation for a petty work?

[Guest]

A petty work was given by me to a partnership firm “Y” for recondition work of some equipment. The work involves collection of equip from our site, shifting to their workplace, reconditioning and again bringing back to our place. 3^rd June, 2015 we received the final item with invoice dated 23^rd may, 2015.

If value of work is only 10000 (excluding taxes), what would be the net payment to the firm. Please answer with calculations.

[Rajagopalan Ranganathan]

Sir,

If your turnover during previous financial year had exceeded the limit of ₹ 10 lakhs or is not likely to exceed during current financial year then you need not pay any service tax on ₹ 10 thousand. otherwise you have to pay service tax whether service provided by you is petty or otherwise.

[Guest]

Dear Rajagopalan Sir, thank you for your response!

Actually I’m working in a PSU and of course our company turnover is more than 10 Lakhs. My confusion is:-

1. Whether service tax will be 14% in this case or 12.36%.
2. For TDS:- base amount will be

Value of work excluding service tax or

Total invoice amount (which was issued in May i.e. with 12.36% service tax) or

Value of work + 14% service tax

3. Whether service tax is to be paid by us or the party.

If possible please answer me with net payment calculation steps.

[Rajagopalan Ranganathan]

Sir,

If you charge ₹ 100/- for the service provided then you have to pay ₹ 12.36 as service tax including education cess and Higher and Secondary Education Cess. for TDS purpose you have to take into account only ₹ 100/- being the gross amount charged for provision of service and it will not include ₹ 12.36. Similarly for calculating service tax you cannot deduct TDS amount from ₹ 100/- I hope the above explanation is clear to you.

AI Summary

Service tax applicability for petty works depends on turnover; TDS must be calculated on the service value excluding service tax. Service tax on a petty reconditioning contract is triggered if the payer's turnover exceeds the prescribed threshold; the invoice may reflect the effective rate including cesses. For TDS the gross charge for the service (value of work excluding service tax) is the base for deduction; service tax cannot be reduced by TDS and TDS is not computed on the service tax component.