Valuation of Works Contracts
Service Tax Valuation Rules have been amended to provide for separate valuation provisions for works contract.
The value for works contract is gross amount charged minus the value of goods sold in executing the contract. Of course it can not be that simple. There are certain explanations.
Gross amount charged will not include the VAT or Sales Tax paid on the Sale of goods involved in the works contract
Value for works contract shall include
(i) Labour charges
(ii) Payment to Sub-contractor for labour and services
(iii) Planning, Designing and Architect charges
(iv) Charges for hiring Machinery, Tools etc.
(v) Cost of consumables, like water, electricity, fuel etc.
(vi) Establishment cost of the contractor
(vii) Similar Expenses for supply of labour and services
(viii) Profit earned relatable to supply of labour and services
Where the VAT or Sales Tax has been paid on the actual value of the sale of goods, then such value adopted for VAT shall be taken as the value for Service Tax also.
Notification No. , Dated May 22, 2007