Works Contract Reverse Charge

[POLYPLEX CORPORATIONLTD]

Dear Expert

We are receving Works Contract Service from an individual contractor having threshold limit above 10,00,000. He is in construction of New Building in the factory. We are giving him only cement and torr steal.

He is billing all the other materials with labour expect cement and steal  & charging service tax 2.472 % (40% of bill value , 50% of 12.36%) as per reverse charge mechanism.

My question is that, while depositing the service tax we should add value of material (cement & steal) provided by us to the contractors. or the contractor should mention these things in his invoice.

Second,  How to calculate service tax liability if no service bill received during the month after consumed cement/steel by contractor on same month.

Third, As he is not showing the same in this bill then interest liabilty arises on both of us.

AI Summary

Reverse charge on works contracts requires the receiver to account for tax on value of materials supplied, altering tax apportionment.
Under the works contract composition rules the taxable base includes the total contract value, explicitly embracing the value of materials freely supplied by the customer; therefore, when cement and steel are provided by the recipient, their value must be included in the works contract valuation and attract the receiver's liability under the reverse charge mechanism. Invoicing practice does not alter this obligation, and timing for payment and interest follows accrual and reverse charge payment rules with contract completion events determining deemed provision dates.