Service Tax on Work Contract

Tax Practical
Practical WCT (Work Contract Tax)

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%