TaxTMI 
TaxTMI 
ST on works contract
06 Nov 2010 
2 Replies 
1437 Views Asked by
Service tax liability remains despite VAT composition; taxable service portion assessed via valuation rules or composition option.
Service tax remains chargeable on the service component of a works contract even if VAT has been paid under a composition scheme; where a service element exists, valuation Rule 2A requires reverse calculation of the taxable service portion, or the taxpayer may instead discharge service tax under the dedicated composition scheme because VAT composition on the whole contract value is not fully deductible from the service tax gross value. (AI Summary)
Service tax remains chargeable on the service component of a works contract even if VAT has been paid under a composition scheme; where a service element exists, valuation Rule 2A requires reverse calculation of the taxable service portion, or the taxpayer may instead discharge service tax under the dedicated composition scheme because VAT composition on the whole contract value is not fully deductible from the service tax gross value. (AI Summary)
If I am executing a WCT contract liable to taxed under MVAT @ 8% of Gross Value of works contract. Since the above contract is also taxable under WCT catgof ST , I opted for option A , which leads to Gross taxale value under ST at NIL. Whether above calc is correct.