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As per Service tax Valuation Rules,
There are 2 types of Works Contract
- Original Works Contract (For New Construction Work)
- Other than Original Works Contract (For Repair and Maintenance Work)
Original Contract
- It is assumed that a Original Work Contract is 40% Services and 60% Goods
- There is 40% Service Component in case of Original Contract,hence Service tax is applicable only on these 40%
- Example: -
- Suppose Work Contract is of 100000
- Service Component=40% of 100000=40000
- Service tax @ 15% =40000*15%=6000
Works Contract
- It is assumed that a Original Work Contract is 70% Services and 30% Goods
- There is 70% Service Component in case of Original Contract,hence Service tax is applicable only on this 70%
- Suppose Work Contract is of 100000
- Service Component=70% of 100000=70000
- Service tax @ 15% =70000*15%=10500
Summary
|
Particulars |
Original Contract |
Other than Original Contract |
|
What type of Contract is covered |
Original works like New Construction,installation,commissioning |
Maintenance Repair work etc |
|
Component of Service |
It has less component of service Only 40% of contract is service |
It has more component of service 70% of contract is service |
|
Service tax Rate |
15%*40%=6% |
15%*70%=10.5% |
