Service Tax on Painting Contract.

[THYAGARAJAN KALYANASUNDARAM]

Dear Expert,

One of our customer is executing the painting works contract, we would like to know whether we should take the value of the contract 40% as original work (or) 70% as finishing service.

Thanks in advance.

[KASTURI SETHI]

70 %. If pure labour 100% liability is on contractor.No benefit of service portion. No RCM in such situation of pure labour. To reap benefit of RCM, other conditions have to be qualified.

[Rajagopalan Ranganathan]

Sir,

As per rule 2A (ii) (A) and (B) of Service Tax (Determination of Value) Rules, 2006,

(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.

[Ganeshan Kalyani]

Painting work is covered under finishing work which is other than original works contract service. Therefore, service tax is payable on 70% of value of contract.

I agree with both the experts Sri Kasturi Sir and Sri Rajagopalan Sir. If pure Labour service is rendered by the contractor then full service tax is liable to be properly charged on the invoice, collected and paid to the government.

In such case, small scale exemption can be availed by the contractor rendering pure service. Thanks.

[Ganeshan Kalyani]

Please read "by the contractor " in continuation to second para of my previous reply.

[Himansu Sekhar]

Seventy percent.

AI Summary

Service tax valuation on painting contracts predominantly treated as taxable under finishing services rather than original works. Works contracts for execution of original works are taxable on forty percent of the contract value, while works contracts not covered as original works-including finishing, completion and restoration services such as painting-are taxable on seventy percent of the contract value. Pure labour contracts for painting are treated as full-service supply and the entire consideration is taxable, with possible small taxpayer exemptions for the service provider; reverse charge does not apply to pure labour.