We have received many queries regarding Calculation of Service tax on Works Contract Service. Here in this blog, a short summary for service tax on works contract is given:<\/p>\n
W.e.f 01-07-2012, All services are taxable except services in negative list and exemption list. To remove doubt a list of declared service is given which are taxable services. In the list of declared services, there is a service of “Service portion in the Execution of a Works Contract<\/span>“. Hence in case of works contract, Service tax is levied only on service portion.<\/p>\n SR=Service Receiver, SP= Service provider, WC= Works Contract, SR-RC= Service tax Reverse charge<\/p>\n What is Works Contract for the purpose of Service tax?:<\/strong><\/span><\/p>\n Works contract means a contract to do a work(service) but wherein some transfer of property from SP to SR, is also involved. But such property (goods) needs to be taxable as sale of goods. In short,<\/p>\n A contract for Service and Supply both is a works contract.<\/p>\n Note: A contract is works contract or not, it should be decided on the basis of contract and not on the basis of individual invoice.<\/span><\/p>\n How to Calculate Service Tax on Works Contract?<\/strong><\/span><\/p>\n A works contract is under Partial Reverse Charge for Service tax, 50% of service tax payable by SP and 50% by SR.But Reverse charge is not applicable where service provider is a company. In case of company, 100% of service tax is payable by SP after claiming ST in his invoice.<\/p>\n A step by step procedure for calculation of Service tax on Works contact is given below:<\/p>\n (A) If Service provider is a Company: (NO ST-RC) ST=Service portion X 15%<\/p>\n 2. If Supply and service portion of work value(Running Bill)<\/span> is not separable then<\/p>\n Original Work like new construction, erection etc. : 40%<\/p>\n Other work like repair and maintenance etc. : 70%<\/p>\n Service Tax payable by SP: (work done value + FOC value) * applicable percentage*15%<\/p>\n <\/p>\n (B) If Service provider is not a Company: (ST-RC-50%) ST Payable by SP=Service portion X 15% X 50% (this part is paid by SR to SP against invoice)<\/p>\n ST payable by SR = Service portion X 15% X 50% (this part is paid by SR to ST authorities)<\/p>\n 2. If Supply and service portion of work done value is not separable then<\/p>\n Original Work like new construction, erection etc. : 40%<\/p>\n Other work like repair and maintenance etc. : 70%<\/p>\n Service Tax payable by SP: (work done value + FOC value) * applicable percentage*15%*50%<\/p>\n Service Tax payable by SR: (work done value + FOC value) * applicable percentage*15%*50%<\/p>\n Note:<\/p>\n
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