Nathan Ltd. gives a works contract to Samy Ltd. for a gross consideration of ₹12,00,000 (excluding all taxes). As per the terms of the contract, all the materials and labour required for the contract are to be supplied b

Computation of Service Tax Payable Particular Amount (in ₹) Gross Consideration (a) 12,00,000 FMV of materials supplied by contractee (b) 2,50,000 Less: Amount Charged by contractee (c) (1,50,000) Total Value of Contract (d=a+b-c) 13,00,000 Value of Service Portion (70%) i.e. ₹13,00,000 * 70% 9,10,000 Service Tax @ 14% 1,27,400 Less: Input Tax Credit: Service Tax Paid ₹11,000 Excise duty paid on capital goods @ 50% * ₹8,000 = ₹4,000 (15,000) Net Service Tax Payable 1,12,400 Notes: No CENVAT Credit is allowed on the Excise duty paid on input used for works contract. It is presumed that the works contract is NOT original work. If it is taken as original work, it will be 40% of ₹13,00,000. Only 50% of duty paid on capital goods has been taken as cenvat credit on the assumption that the works contract has been completed within first year of bringing in the capital goods. Note: As per Rule 2A (ii) of Valuation Rules, 2006 when details of labour and other service charges are not available, value of services shall be computed under composition scheme at a fixed percentage of contract price.