TaxTMI 
TaxTMI 
MY CLIENT IS ONE OF THE WORKS CONTRACT SERVICE PROVIDER. FOR THE YEAR 2016-17, HE PAID THE TAX IN 60:40 BUT AS PER THE AUDITED PROFIT & LOSS ACCOUNT THE DEPARTMENT DEMANDED TO PAY SERVICE TAX BECAUSE THE COST OF MATERIAL IS LESS THAN 60%. THE DEPARTMENT HAS ASCERTAINED THE PURCHASE VALUE FROM THE BOOKS OF ACCOUNTS. ACTUALLY THE PURCHASE IS CORRECT. WHETHER ANY WAY TO PROVE 60% IS THE RIGHT ONE OR NOT? IF ANY JUDGMENTS OR NOTES AVAILABLE PLEASE PROVIDE
TAX VALUE BASED ON PROFIT & LOSS ACCOUNT OR ACTUAL COST
31 Oct 2022 
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Valuation of works contracts: burden on taxpayer to prove actual or deemed allocation to avoid service tax revaluation.
Valuation of works contracts follows actual allocation of sale and service where segregation is available; Rule 2A prefers actual basis and places the burden of proof on the assessee seeking deemed allocation. Proof of tax payment on the sale portion is required to support exemption or concessional treatment. Purchase price in books is not necessarily the value of property in goods transferred, and payment under a VAT composition scheme may affect the department's ability to substitute purchase cost for contract valuation. (AI Summary)
Valuation of works contracts follows actual allocation of sale and service where segregation is available; Rule 2A prefers actual basis and places the burden of proof on the assessee seeking deemed allocation. Proof of tax payment on the sale portion is required to support exemption or concessional treatment. Purchase price in books is not necessarily the value of property in goods transferred, and payment under a VAT composition scheme may affect the department's ability to substitute purchase cost for contract valuation. (AI Summary)