VAT under composition scheme vis a vis service tax

[Rishi Raj]

 

Company has appointed a civil contractor for building and the cost break is given below:

Contract Price                           - Rs. 100 crore inclusive of VAT

Service Tax @ 4.12% on 100  - Rs 4.12

Total                                              Rs. 104.12

 

 

·It seems that contractor has gone for composition scheme under VAT  (U.P VAT) because no VAT component is shown separately in the invoices as required under composition scheme.

·Service Tax has been charged @ 4.12 % applicable for work contract service under composition scheme.

I have following queries to address the issue :

1. Is it possible for the civil contractor to calculate the VAT liability basis actual material value or standard deduction for labour / services cost ( say  30% for civil contracts) inspite of paying VAT at fixed % under VAT composition scheme?

2. What is the rate of VAT in uttar pradesh under composition scheme?

3. In the very case, service tax is being charged on Rs 100 cr which is inclusive of VAT . However the same is to be charged on excluding VAT amount.  How to compute the excluding VAT component which is under VAT composition scheme?

[Shruti Gathani]

Hello Mr.Rishi Raj,

Answer to your first querry,

the civil contractor has the following options.:

1. Composition scheme as he has charged.

2. Charge Service tax @ 10.3% on Amount = Gross Amount Charged in invoice for the civil contractor's service excluding VAT amount - Value of goods on which VAT is paid (as accepted under VAT laws).

[Shruti Gathani]

Hello Mr.Rishi Raj,

Answer to your third query.:

If VAT has been paid under Composite Scheme, then Service tax also has to be charged at composite rate because the value on which VAT has been paid cannot be worked out.

AI Summary

Service tax valuation on composite VAT supplies requires composite-rate charging when VAT component cannot be identified. A civil contractor may either follow the VAT composition scheme or compute service tax by applying the service-tax rate to the gross contract amount less the value of goods on which VAT is paid. If VAT is paid under a composition scheme and the goods component cannot be identified from invoices, service tax must instead be charged at the composite rate corresponding to the VAT composition treatment.