Dear Experts,
What if any contract is entered into with a supplier of material for Supply and fixing of material and Vendor is not registered with Service Tax and charging CST/VAT on whole bill.
In other words vendor is charging bill for supply only and it will be inclusive of labour charges.
Will that type of contract amount to works contract thereof attracting 60% abetement and 50% reverse charge, or it is fine to book whole as supply only thus ignoring labour charges.
regards
Ashish
Clarification on tax obligations for works contracts: Reverse charge applies to 50% of 40% of the bill. A discussion forum addressed a query about a works contract with a vendor not registered for Service Tax, charging CST/VAT on the entire bill, including labor. Experts clarified that such contracts are considered works contracts, requiring the payer to handle 50% of 40% of the bill under reverse charge provisions. It was emphasized that the transaction's service element should be assessed, and if dominant, it falls under works contract laws. Participants advised checking state-specific VAT laws for abatement provisions, which range from 15% to 40%, and ensuring compliance with applicable tax obligations. (AI Summary)
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