TaxTMI 
TaxTMI 
Service tax - work contractor towards erection fabrication
18 May 2007 
2 Replies 
11913 Views Asked by
Service tax apportionment: applicability and rate depend on CENVAT credit and composition treatment for works contracts.
A contractor cannot confine a VAT composition rate to a deemed portion of a works contract; composition VAT applies to the total contract value. Service tax treatment turns on CENVAT credit: where CENVAT is availed, service tax applies to the full contract value; where CENVAT is not availed and notification conditions are met, service tax may be applied to a specified portion. An optional composition scheme allows a prescribed lower levy on gross contract value after deducting VAT charged, provided input tax credit is not taken. (AI Summary)
A contractor cannot confine a VAT composition rate to a deemed portion of a works contract; composition VAT applies to the total contract value. Service tax treatment turns on CENVAT credit: where CENVAT is availed, service tax applies to the full contract value; where CENVAT is not availed and notification conditions are met, service tax may be applied to a specified portion. An optional composition scheme allows a prescribed lower levy on gross contract value after deducting VAT charged, provided input tax credit is not taken. (AI Summary)
we are manufactures We are getting bill from our work contractor towards erection fabrication etc, with charging 4% Vat on 33% value of bill amount as well charging 12% service tax on full bill value . Is this correct or 12% service tax should be applicable on 67%( 100-33) of bill value