ST of Works Contract Service

[Elangovan V]

HI,

In Works contract Service, the contract has been awarded in the year 2008 for Rs. 600000/-

In 2008 advance of Rs. 100000/- recd, the Service tax liability of Rs. 12360/- i.e.,@ 12.36% is paid to the department, likewise one more advance recd during the year 2010 for which the service tax was paid @ 10.30%.  Now the entire work is completed we need to raise invoice for Rs. 600000/- i.e. 2012.  How service tax to be charged in the invoice and how much service tax to be paid after adjusting the ST paid on advances.  The illustration is given below;

                                Adv Recd             Rate of ST Paid                  ST Paid

                                100000                  12.36%                                 12360

                                100000                  12.36%                                  12360

                                100000                  10.30%                                  10300

                                100000                  10.30%                                  10300

               ______________________________________

 

                                400000                                                                  45320

                                ______________________________________

 

 

Pl explain.

 

[Vivek Harsh]

Dear Sir

u need to bifurcate between the total contract price between value of material and labour charges. Service tax is to be paid only on labour charge and material supplied shall attract VAT liability. If after making the above adjustments if any duty liabilty arises u need to make the balance payments.Cenvat credit only for input service and not for input goods.

OR

In case value of material and labour cannot be bifurcated tax shallbe paid @ 4% percent. No cenvat credit available. 

[Vivek Harsh]

Dear Sir

u need to bifurcate between the total contract price between value of material and labour charges. Service tax is to be paid only on labour charge and material supplied shall attract VAT liability. If after making the above adjustments if any duty liabilty arises u need to make the balance payments.Cenvat credit only for input service and not for input goods.

OR

In case value of material and labour cannot be bifurcated tax shallbe paid @ 4% percent. No cenvat credit available. 

AI Summary

Works contract service tax: bifurcate material and labour; tax applies to labour or composition, adjust advances accordingly.
Service tax on a completed works contract must be determined by bifurcating the contract price into material and labour: service tax applies only to the labour/service component and VAT applies to materials; service tax paid on advances is to be adjusted against the final service tax liability and any shortfall paid on invoicing. Cenvat credit is admissible for input services only, not for input goods. If material and labour cannot be reliably separated, the contract value is taxed under the composition mechanism with no cenvat credit, and earlier advance payments are adjusted against that liability.