rule 3 of service tax

[RAM AVTAR]

we are government contractor. our contract is composite.  contractee is deducting 2% tds on vat on gross value .  whether we have to pay service tax on after deducting tds of vat from total contract value or on gross value since rule 4 says that total taxable value should not be less than gross contract value

[Ramanujam Varadarajan]

Service tax payable on the entire contract value i.e. amount received + TDS deducted.

[RAM AVTAR]

whether sales tax paid on said project is also deductable since we have not charged separately in our contract

AI Summary

Service tax valuation: payable on entire contract value including amounts subject to TDS, not only net receipts.
Service tax on a composite government contract is to be computed on the entire contract value, meaning the amount received plus the TDS deducted by the contractee, so taxable value is not reduced by deduction of TDS on VAT. A follow-up query on whether sales tax/VAT paid (where not separately charged) may be deducted was raised but not resolved in the supplied record.