New Works Contract Valuation Rules for
Service Tax
[Ref: Notification No. 24/2012 -
Service Tax dated 6 June 2012]
In exercise of the powers
conferred by clause (aa) of sub-section (2) of
section 94 of the Finance Act, 1994 (32 of 1994) and in supersession of the
notification of the Government of India in the Ministry of Finance (Department
of Revenue) number 11/2012 – Service Tax, dated the 17th March,
2012, published in the Gazette of India, Extraordinary, vide number G.S.R. 209
(E), dated the 17th March, 2012, the Central Government, hereby
makes the following rules further to amend the Service Tax (Determination of
Value) Rules, 2006, namely :-
1.(1) These rules
may be called the Service Tax (Determination of Value) Second Amendment Rules,
2012.
(2) They shall
come into force from the 1st day of July, 2012.
2. In the Service
Tax (Determination of Value) Rules, 2006 (hereinafter referred to as the said
rules), for rule 2A, the following
rule shall be substituted, namely:-
“2A. Determination of value of service portion
in the execution of a works contract.- Subject to the provisions of section
67, the value of service portion in the execution of a works contract ,
referred to in clause (h) of section 66E of the Act, shall be determined in the
following manner, namely:-
(i) Value of
service portion in the execution of a works contract shall be equivalent to the
gross amount charged for the works contract less the value of property in goods
transferred in the execution of the said works contract.
Explanation.- For the purposes of this clause,-
(a) gross
amount charged for the works contract shall not include value added tax or
sales tax, as the case may be, paid or payable, if any, on transfer of property
in goods involved in the execution of the said works contract;
(b) value of works contract service shall include, -
(i) labour charges for execution of
the works;
(ii) amount paid to a sub-contractor for labour
and services;
(iii) charges for planning, designing and architect’s fees;
(iv) charges for obtaining on hire or otherwise, machinery and
tools used for the execution of the works contract;
(v) cost of consumables such as water, electricity, fuel used in
the execution of the works contract;
(vi) cost of establishment of the contractor relatable to
supply of labour and services;
(vii) other similar expenses relatable to supply of labour and services; and
(viii) profit earned by the service provider relatable to supply of
labour and services;
(c) Where value
added tax or sales tax has been paid or payable on the actual value of property
in goods transferred in the execution of the works contract, then, such value
adopted for the purposes of payment of value added tax or sales tax, shall be
taken as the value of property in goods transferred in the execution of the
said works contract for determination of the value of service portion in the
execution of works contract under this clause.
(ii) Where the
value has not been determined under clause (i), the person liable to pay tax on
the service portion involved in the execution of the works contract shall
determine the service tax payable in the following manner, namely:-
(A) in case of works contracts entered into for execution of
original works, service tax shall be payable on forty per cent. of the total amount charged for the works contract;
(B) in case of works
contract entered into for maintenance or repair or reconditioning or
restoration or servicing of any goods, service tax shall be payable on seventy
percent. of the total amount charged for the works
contract;
(C) in case of
other works contracts, not covered under sub-clauses (A) and (B), including
maintenance, repair, completion and finishing services such as glazing,
plastering, floor and wall tiling, installation of electrical fittings of an
immovable property , service tax shall be payable on sixty per cent. of the total amount charged for the works contract;
Explanation 1.- For the purposes of this rule,-
(a) “original works” means-
(i) all new constructions;
(ii) all types of additions and alterations to abandoned or
damaged structures on land that are required to make them workable;
(iii) erection, commissioning or installation of plant, machinery
or equipment or structures, whether pre-fabricated or otherwise;
(d) “total amount”
means the sum total of the gross amount charged for the works contract and the
fair market value of all goods and services supplied in or in relation to the
execution of the works contract, whether or not supplied under the same
contract or any other contract, after deducting-
(i) the amount charged for such goods or services, if any; and
(ii) the value added tax or sales tax, if any, levied thereon:
Provided
that the fair market value of goods and services so supplied may be determined
in accordance with the generally accepted accounting principles.
Explanation 2.--For the
removal of doubts, it is clarified that the provider of taxable service shall
not take CENVAT credit of duties or cess paid on any
inputs, used in or in relation to the said works contract, under the provisions
of CENVAT Credit Rules, 2004.”.
3. In the said
rules, in rule 2B, the words,
brackets, letters and figures “referred to in sub-clause (zm)
and (zzk) of clause (105) of section 65 of the Act,”
shall be omitted.
4. In the said
rules, after rule 2B, the following
rule shall be inserted, namely:-
“2C. Determination of value of service portion
involved in supply of food or any other article of human consumption or any
drink in a restaurant or as outdoor catering.- Subject to the provisions of
section 67, the value of service portion, in an activity wherein goods being
food or any other article of human consumption or any drink (whether or not
intoxicating) is supplied in any manner as a part of the activity at a
restaurant or as outdoor catering, shall be the specified percentage of the
total amount charged for such supply, in terms of the following Table, namely:-
Table
|
Sl.No. |
Description |
Percentage of the total amount |
|
(1) |
(2) |
(3) |
|
1. |
Service portion in an
activity wherein goods, being food or any other article of human consumption
or any drink(whether or not intoxicating) is supplied in any manner as a part
of the activity, at a restaurant |
40 |
|
2. |
Service portion in
outdoor catering wherein goods, being food or any other article of human
consumption or any drink(whether or not intoxicating) is supplied in any
manner as a part of such outdoor catering |
60 |
Explanation 1.- For the purposes of this rule, “total amount” means the sum total of
the gross amount charged and the fair market value of all goods and services
supplied in or in relation to the supply of food or any other article of human
consumption or any drink(whether or not intoxicating), whether or not supplied
under the same contract or any other contract, after deducting-
(i) the amount charged for such goods or services, if any; and
(ii) the value added tax or sales tax, if any, levied thereon:
Provided that the
fair market value of goods and services so supplied may be determined in
accordance with the generally accepted accounting principles.
Explanation 2.- For the
removal of doubts, it is clarified that the provider of taxable service shall
not take CENVAT credit of duties or cess paid on any
goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act,
1985 (5 of 1986).”.
5. In the said
rules, in rule 3, for the words
“where the consideration received is not wholly or partly consisting of money”,
the words “where such value is not ascertainable” shall be substituted.
6. In the said
rules, in rule 5, in sub-rule(1), in
the Explanation, for the words, brackets, letters and figures “services
specified in sub-clause (zzzx) of clause (105) of
section 65 of the Finance Act, 1994, the value of taxable service shall be the
gross amount paid by the person to whom telecom service is provided by the telegraph
authority”, the words “the value of the telecommunication service shall be the
gross amount paid by the person to whom telecommunication service is actually
provided.” shall be substituted.
7. In the said
rules, in rule 6,-
(a) in sub-rule (1),-
(i) in clause (viii), for the words “in any manner; and” the
words “in any manner;” shall be substituted;
(ii) in clause (ix), for the words “insurance agent”, the words
“insurance agent; and” shall be substituted;
(iii) after clause (ix), the following clause shall be inserted, namely:-
“(x) the amount
realised as demurrage or by any other name whatever
called for the provision of a service beyond the period originally contracted
or in any other manner relatable to the provision of service.”;
(b) in sub-rule (2),-
(i) for clause (iv), the following clause shall be substituted, namely:-
“(iv) interest on delayed payment of any
consideration for the provision of services or sale of property, whether
moveable or immoveable;”
(ii) after clause (v), the following clause shall be inserted, namely:-
“(vi) accidental damages due to unforeseen actions not relatable
to the provision of service; and
(vii) subsidies and grants disbursed by the Government, not
directly affecting the value of service.”.
8. In the said rules,
rule 7 shall be omitted.
[F. No. 334/1
/2012-TRU]