Presently works contract for
valuation purpose are categorized under three categories:-
(i) original work
(ii) works contract relating to movable properties and
(iii) other contracts
Service
tax on the service portion involved in the execution of the works contract is
presently determined in the following manner:-
1.
In the case of original works:- 40% of the value of total amount charged.
2.
In the case of the works contract relating to movable properties the value of the
service portion in the execution of the works contract :- 70% of the value of
the total amount charged.
3.
In the case of other works contract other than those covered under the above
(1) and (2) including the maintenance, repair, completion and finishing
services of immovable properties, :- 60% of the total amount charged.
But
Rule 2A of the Service Tax (Determination of Value) Rules,
2006 relating to valuation of works contract services will stand amended with effect from 1-10-2014 and after
amendment, the item (ii) and (iii) will get combined and service tax would be
payable on 70% of the total amount charged.
It means that category three
(residual contracts) will be taxable on 70% of the value of total amount
charged.
Ref:- [Notification No.
11/2014-ST, dated 11-7-2014] [Effective : 1-10-2014]
