Pradeep Jain - Chartered Accountant

Dear Sir, II have a one contract which is related to paint (SUNCITY PROJECTS PVT. LTD) on wall and water tank( tower),party also charged service tax @12.36% on rate per sq.ft.( specified). Pls guide me applicability of reverse charges on it. Whether above contract cover under work contract? If party would not be charged service tax then what action will be taken? Pls guide me. Thanks and regards Amit Gupta ASST. MANAGER SUNCITY PROJECTS PVT.LTD.

Firstly, it is not clear that the contractor is individual or company. If he is a company then reverse charge is not applicable. But if he is an individual then the next it is not clear whether the contract is inclusive of material or labour charges only. If it is inclusive of material then it will fall under works contract. The next question will be whether the same is done on a new building or old building. If done first time on new building then it will fall under construction and the service tax will be payable @ 60% under finishing services. But if it is done on old building then the service tax will be payable on maintenance or repair then the service tax will be payable @ 70% of gross value. If the answer to first question of labour and material is in negative i.e. it is labour contract only then we have to see whether it falls under manpower supply agency. For this, we have to see whether the supervision and control is with contractor or the company. This will be dependent on terms and conditions of agreement. However, when the work is on piece rate as is in your case then normally the supervision and control is with the contractor. But we reiterate that it will depend solely depend on terms and conditions of agreement. If the control and supervision is with the contractor then no reverse charge is applicable. In other case, the reverse charge is applicable and company has to pay the service tax on 75% of total service tax amount.

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