what is the service tax liability on composite work contracts

[skjain]

An assessee is doing composite work contracts . How to determine service tax liability . What is the correct method of calculation of service tax liability.

[prashantmaharishi]

Kindly refer rule 2A of determination of value rules .

[Vinay Surana]

1) Value of Services in case of Work Contract:- New Rule 2A provides following two options:-

a. Pay service tax on Value of services after deducting value of goods from the gross value.
b. Pay service tax at composite rate
•In case of original work, pay service tax on 40% value,
•In case of maintenance or repair or reconditioning or restoration or servicing of any goods, pay service tax on 70% value,
•In case of all other works contract, pay service tax on 60% value.
•Service provider is also eligible to avail CENVAT Credit of input services and capital goods.

2) Rate of composition in case of activity at a restaurant or as outdoor catering:

a. In case of Restaurant, pay service tax on 40% value.
b. In case of Outdoor Catering, pay service tax on 60% value.


In both the cases, service provider is eligible to avail CENVAT Credit of inputs (except goods classifiable under Chapters 1 to 22 of CETA), input services and capital goods.


3) Changes in Rule 6 (Inclusion or exclusion of certain values from taxable value):-
a. Amount realised as demurrage related to taxable services shall be included.
b. Interest on delayed payment shall be excluded.
c. Taxes levied by any Government on any passenger travelling by air shall be excluded.
d. Accidental damages due to unforeseen actions not relatable to the provision of service shall be excluded.
e. Subsidies and grants disbursed by the Government, not directly affecting the value of service shall be excluded.

Please refer the concern Section  once again for more clarity on the subject