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Topic : cost control ideas
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Construction Planning & Management

Asked by : svns yarramsetti, Accounts Manager, pnr infra india pvt ltd
Industry : Construction
Functional Area : India
Activity: Question posted: 01 27 2009 09:02:20 +0000, 3 answers, 4614 views, last activity 07 06 2010 20:18:08 +0000

if we are giving sub contract work for structure design (civil), upto brick work and plastering including material but not included steel, cement, on which amount the service tax effected.

total labour work + bricks +sand + metal his responsible

we supply cement & steel only

plz. give me suggession in this regard

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Rating : +1 

for labor Service tax 12.36% X 30.% x 100% of work value

for Material tax 12.5% x 70% x 100 of work value

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by   kota siva rama prasad, Sector Engineer (Q.S), hiranandani township pvt ltd  | 01 27 2009 12:29:35 +0000
  Answered by     RAMANATHA PRABHU N, Chartered Accountant  | 12 21 2009 11:35:40 +0000
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You are asking for service tax application on construction contracts right?

1. In case your annual turnover from all contracts do not exeed Rs.10 laks, you don't have any service tax obligation, otherwise you have following options;

a) You can opt for compounding, if you opt this pay 4% of the gross contract value as service tax, if so you will not be availed any CENVAT credit. or

b) Pay 10% on taxable service as service tax and avail CENVAT credit.


  Answered by     Naimish , Construction-Heavy, Gourav Engineers  | 02 02 2009 11:12:03 +0000
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There are differant schemes of VAT & Service tax for Civil works.

1. Composite VAT @ 5% + Service Tax 4.12% on 100% amount.

2. VAT @ 12.5% on 70% of Total amount & Service Tax 12.36% on 30% of Total amount.

You have to check with your CA that if you are paying the taxes to your sub-contractor than will you get it's set-off or not ? because it depands on Tax scheme selected by you.

If steel & cement is in your scope than better idea is to issue a work order only for Labour works & pay them only 12.36% Service Tax. ( Sand , Metal & Bricks will be in sub contractors scope , but you have not to mention in PO, it will be your mutual understanding. Because as you know for sand ,cement & metal nobody is giving you Tax invoice with VAT, so why to pay VAT to sub contracor un necessaryly & create complications.

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