Service Tax on Works Contract

[SANJAY BAHETI]

Respected All, My query is that suppose if the service provider has only charged VAT in his bill and has not charged Sevice tax in the bill,the provider is a Individual and we are a company. Dose this trancation qulify for works contract?If it is a works contract than on what amount the service tax should be paid under reverse charge? the amount is Rs. 41 Lacs including Vat.

[vasudevan unnikrishnan]

In the querry,the nature of service rendered /availed is not mentioned.Hope it is not mentioned in the negative list/mega exemption list.

However, if the individual in his bill for 41 lakhs has not paid service tax,it is a straight case of evasion,unless the service given  is in the negative list/mega exemption .

The reverse charge will be applicable to you on the service.,tax on the amount less of VAT is to be paid at the appropriate portin/percentage.

unnikrishnan.v. 

[YAGAY andSUN]

If the services come under reverse charge mechanism, then, othe ratio of liability will be 50-50.  Service tax,obviously will be paid on the service portion amount.  However, service tax can be calculated under composition scheme i.e. 4.8% on the total contract value or vivisected as per Rule 2A.

AI Summary

Reverse charge applicability for works contract services: recipient may owe tax on value net of VAT; composition option considered. Question whether a transaction qualifies as a works contract where the supplier charged only VAT and not service tax. If the service is not in the negative list, omission of service tax indicates evasion and the recipient must pay tax under the reverse charge mechanism on the service portion, computed on the contract value net of VAT. Calculation options include applying a composition formula on the total contract value or segregating service and goods values pursuant to Rule 2A to determine the taxable base.