Works Contract Tax

[PONNADA B K RAVIKUMAR]

we are entered an agreeement for Amc of our Computers (through Residentail Engineers), last month the service provide charged Service Tax @ 10.3% on total bill value, where as this month thet are charged 30:70, 30% of bill value there are charging service Tax and again on total value of the bill value they are charges WCT @ 2.8%, can you pls confirm , is there any change in WCT , and from which date,

[Rama Krishana]

The scheme of 30:70 in not correct. How they identify 70% as cost of material whereas they are paying WCT on the whole amount at the rate of 2.8%. Since your case is of AMC, you may avail the benefit under notification no. 12/2003 (but you have to ensure to prove the cost of material). In case you are sure that your services are falling under the category of works contract it is better to avail the benefit of composition scheme @4%

AI Summary

Works contract composition scheme guides AMC tax treatment; prove material costs or elect works contract classification. Dispute concerns taxation of an AMC where the provider used a 30:70 split to identify material cost and charged service tax while withholding applied on the entire bill. The 30:70 allocation is unsupported; benefit under the relevant notification is available only if cost of materials is proven. If the engagement is properly a works contract, parties may instead elect the works contract composition mechanism. Emphasis is on documentary proof of material costs and correct contractual characterisation to determine applicable tax treatment.