How to calculate Reverse Service Charge

How to calculate Reverse Service Charge

Dear sir,
i have raised a work contract invoice (under the maintenance including Labour & material)
The cost of labour and material is Rs. 89186.00 Without any tax. + 15% Service Tax

Now when i received the payment from the Party with payment advice it is showing following deductions:-

Gross Total Amount : Rs. 89,186.30
TDS Deductions : Rs. 900.00
WCST (Service Tax) : Rs. 2816.00 (50% By Service Provider & 50% by service receiver)

Can anyone help me to understand all this deductions and how to raise correct invoice from next time

Asked 7 years ago in Service Tax

Hi,

As per Rule 2A of Service Tax (Determination of Value) Rules, 2006, Service portion in Works Contract is deemed to be

a) 40% of Value Charged in case of Original Works (In this case effective Tax rate is 15% on 40% = 6% i.e 5.6% Service Tax, 0.2% SBC and 0.2% KKC)

b) 70% of Value Charged in all other cases (In this case, effective rate is 15% on 70% = 10.5% i.e 9.8% Service Tax, 0.35% SBC and 0.35% KKC)

However, if Works Contract Services are provided by an Individual/HUF/Partnership Firm to a body corporate, then reverse charge is applicable. Service Provider has to pay Service Tax on 50% of Service Portion and the Service receiver has to pay tax on the remaining 50% of the Service Portion.

So, whenever you are billing to Corporate Clients, charge 50% of the effective rate as service tax i.e 3% or 5.25% as the case may be.

However, whenever you are billing to non-corporate Clients, charge Service Tax at the full effective rate i.e 6% or 10.5% as the case may be.