Annual Maintenance under wct on reverse charge

[RAM SHARMA]

Dear Experts,

As per new Work Contract Tax under reverse charge machenism a service receiver is liable to pay 50% serivice tax. Is all Annual Maintenance service comes under wct. Pl advice.

Thanks

[YAGAY andSUN]

Section 65B(54) defines works contract as follows:

"works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any moveable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property.

Thus as per the above definition of works contract for the purpose of service tax two conditions must be satisfied before a contract may be called a works contract.

1. The contract must be such that wherein transfer of property in goods in the execution of such contract is leviable to tax as sale of goods. Meaning thereby the goods incorporated in such contract must be leviable to VAT or sales tax as sale of goods.

The point to be noted here is that the word used is “Leviable to tax as sale of goods” that means it is not necessary that VAT must have been actually paid on the transfer of property in goods incorporated in the contract, it is enough if transfer of property in goods is leviable to tax as sale of goods for the purpose of determining whether such contract is a works contract or not.

2. The contract must be for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any moveable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property.

Before the introduction of negative list only contracts relating to immoveable property were considered as works contract but now contracts relating to both immoveable and moveable property will be covered in the definition of works contract if the first condition is also satisfied, for the purpose of service tax

[manjunatha e]

Dear Experts,

 Plz suggest - LAPTOP AMC person charged ST @ 12.36% on 70% of base value  & WCT @ 5.5% on 75% on base value of the invoice - please let me know what they have charged tax rates are correct ?

Base value of Invoice                                   Rs 129,600.00

ST @ 12.36% on 70% of base value        Rs   11,212.99

[email protected] on 75% of base value              Rs      5,346.00

 

Total Invoice value (Incl of Tax)                  Rs 146,158.99

[NANDKUMAR SAGWEKAR]

1. Reverse chage mechanism is applicable in respect of work contract if

    a) SP is Individual, AOP, HUF ,PF,LLP providing WCS to

    b) SR who  is Company or Body corporate.

2. The taxable portion in case cited by you is 70% whihc is correct in case of AMC of movable goods.

3. The constitution of SP is as per ( 1 ) ( a ) and constitution of SR is as per 1 ( b ) then SP has to charge and pay the ST 50% and balance 50% by SR.

4. In case cited by you , SP has to charge Rs.5606 in his bill and SR has to pay the ST to SP.

5. SR has to pay Rs.5606 as ST as receipant of services .

Thanks

 A M SHEMBEKAR

[Monu Kumar]

Dear Sir,

I want to information about Annual Maintenance Contract ( Maintenance Or Repair Service ) And Please Clarify this service under which service

Service Tax Liable on a receiver

Regards

Monu

AI Summary

Clarification on whether maintenance services are subject to Work Contract Tax under reverse charge mechanism with 50% tax split. A query was raised about whether annual maintenance services fall under the Work Contract Tax (WCT) with reverse charge mechanism, requiring the service receiver to pay 50% of the service tax. Responses clarified that for a contract to be considered a works contract, it must involve the transfer of goods taxable as a sale and relate to construction, installation, or maintenance activities. It was noted that service providers charge specific tax rates for maintenance services, with service providers and receivers sharing the tax burden under the reverse charge mechanism. The discussion included examples of tax calculations for laptop maintenance services.