Works Contract Service Tax

[anil goenka]

If a company done work for set of new Bank Branches in contracted structure . there scope of works start from civil work (alteration or demonstration of the structure ) to fixing of globe sign, painting, floor fiting, furniture all works. Is the work fall under Original Works. Pls Advice

[Rajagopalan Ranganathan]

Sir

As per Explanation (1) (a) of rule 2 A of Service Tax (Determination of Value) rules, 2006-

"original works" means-

(i) all new constructions;

(ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

(iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise.

Except the above all other works are not original works.

According to rule 2A (C) (ii) of Service Tax (Determination of Value) rules, 2006--

Where the value has not been determined under clause (i), the person liable to pay tax on the service portion involved in the execution of the works contract shall determine the service tax payable in the following manner, namely:-

(A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent. of the total amount charged for the works contract;

(B) in case of works contract, not covered under sub-clause (A), including works contract entered into for,-

(i) maintenance or repair or reconditioning or restoration or servicing of any goods; or

(ii) maintenance or repair or completion and finishing services such as glazing or plastering or floor and wall tiling or installation of electrical fittings of immovable property,

service tax shall be payable on seventy per cent. of the total amount charged for the works contract.

AI Summary

Original works classification determines lower taxable service portion, while finishing and repair services attract a higher taxable portion.
The Rules define original works to include all new constructions, specified additions or alterations to make abandoned or damaged structures workable, and erection, commissioning or installation of plant, machinery, equipment or structures. Where a contract qualifies as original works, a lower proportion of the total contract amount is taken for service tax; contracts not covered as original works-including maintenance, repair and completion or finishing services such as glazing, plastering, tiling or installation of electrical fittings-are subject to a higher proportion of the total contract amount for service tax determination.