Service Tax on Works Contract - Post Negative List Regime

The Service Tax liability on Works Contract after July 1, 2012 is summarised as follows:

Value of Works contract for Service tax       = Gross amount received – Value of goods

     transferred in the execution of works contract

Condition	Value of Service Tax	Remarks
If Registered under VAT &  returns filed	·         Value of Service =  Gross amount received – Amount for which VAT is paid (amount declared in VAT return as turnover)	Easy way
Otherwise
a)      if value of materials & Value of service is separately identifiable	·         Value of Services = Labour charges + paid to sub-contractor for labour + charges for planning/ designing / architect fee + machinery /equipment hire + Cost of consumables (water, electricity, fuel etc) + Proportionate establishment expenses relating to service + proportionate profit relating to service	It is difficult to arrive at this value
b)      If value of materials are NOT separately known	·         In case of ORIGINAL WORKS* Value of Service = 40% of the Gross Amount received
	·         In case of Repairs of any goods (movable) Value of Service = 70% of the Gross Amount received
	·         In any other case Value of Service = 60% of the Gross Amount received

In any case, CENVAT Credit cannot be taken.

* Original work means

·         any new construction

·         any additions or alterations to abandoned or damaged structure for making them workable

·         Erection commissioning or installation of plant, machinery or equipment or structures

The Service Tax calculated above will be paid as follows:

If Service Provider is a	If Service Receiver is a	Service tax is payable by		Ratio
Individual, Proprietary Firm, Partnership Firm	Company	Service Provider	Service Receiver	50% : 50%
	Other than Company	Service Provider		100%
Government or Local authority	Any person		Service Receiver	100%
Other than above	Any person	Service Provider		100%

Note: If Service tax liability is payable by both the parties, the amount payable by respective parties should be separately shown in the invoice.