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The document discusses the applicability of service tax on work contracts for the Indian Ministry of Defence. It notes that the service tax rate was increased to 14% effective June 1, 2015. As contractors' quoted rates are deemed inclusive of all applicable taxes, the increased service tax liability will be borne by contractors. To avoid cost overruns, the appropriate percentage increase for service tax must be included in market variation calculations used for approving estimates and tenders. All zones are directed to revise their market variation percentages accordingly.
The document discusses the applicability of service tax on work contracts for the Indian Ministry of Defence. It notes that the service tax rate was increased to 14% effective June 1, 2015. As contractors' quoted rates are deemed inclusive of all applicable taxes, the increased service tax liability will be borne by contractors. To avoid cost overruns, the appropriate percentage increase for service tax must be included in market variation calculations used for approving estimates and tenders. All zones are directed to revise their market variation percentages accordingly.
The document discusses the applicability of service tax on work contracts for the Indian Ministry of Defence. It notes that the service tax rate was increased to 14% effective June 1, 2015. As contractors' quoted rates are deemed inclusive of all applicable taxes, the increased service tax liability will be borne by contractors. To avoid cost overruns, the appropriate percentage increase for service tax must be included in market variation calculations used for approving estimates and tenders. All zones are directed to revise their market variation percentages accordingly.
Dte of Works, E-in-C's Branch Integrated HQ of MoD (Army) Kashmir House, Rajaji Marg . New Delhi 110011.
A/95533/22-20/Pol/E2W (PPC)
' S Dec 15
List 'A' and 'B'
APPLICABILITY OF SERVICE TAX ON WORK CONTRACTS
1. Reference following E-in-C's Branch letters: -
(a)
No 66546/Manual/449/E8 dated 08 May 15.
(b)
No 66546/Manual/458/E8 dated 04 Jun 15.
2. Government of India : Ministry of Finance (Department of Revenue) vide
Notification No 14/ 2015 Service Tax dated 19 May 15 had increased the rate of service tax to 14b/o wef 01 Jun 15. 3. As per the 'Manual on Contract' Appendix 8.1. Annexure XVI regarding Special Conditions for Reimbursement/ Refund on Variation in "Taxes Directly related to Contract Value". the rates quoted by the Contractor shall be deemed to be inclusive of all taxes (including Sales tax/ VAT on materials, sales Tax/ VAT on Work Contracts, turnover tax, Service tax, Labour welfare cess/ tax etc.), duties, Royalties, Octroi and other levies payable under the respective statues. No reimbursement/ refund for variation in rates of taxes, duties, Royalties, Octroi and other levies, and/ or imposition/ abolition of any/ existing taxes, duties, Royalties. Octroi and other levies shall be made, except as provided in sub para (b) of Annexure XVI to Appndix 8.1. 4. In view of the above, the liability of payment of service tax shall be borne by the contractor. This increased liability would result in higher quoting in tenders by the contractors, which if not properly accounted for in the AEs and sanctioned will result in increase in number of FC cases. Therefore, after due deliberation, it has been decided that the appropriate percentage of applicable liability towards service tax are to be included in Market Variation (MV) before being applied in the RIC/ AEs. All cases under process should include updated MVs. 5. All zones are directed to revise the MV percentage accordingly and circulate in their AOR for correct preparation of AEs and to avoid FC/ RAA cases. The revised MV should take into account the actual rates and should not merely result in an increase by a certain percentage.
ASaViiir Dube) < Col Dir (PPC) For E-in-C
Copy to:QMG's Branch / DG LWE
HQ of MoD (Navy) / Dte of Wks 'A' Block New Delft HQ of MoD (Air Force) / Dte of Wks Vayu Bhawan. Rafi Mara New Delhi - 110106. HQ IDS / Works Dte HQ SFC C/o 56 APO PIN - 908547 Coast Guard HQ National Stadium Complex New Delhi - 110001. QMG's Branch / ADG TE Dir (Works), HQ DGQA Room No 153, 'H' Block New ne!hi - 110011 HQ CME Pune Pin - 908797 Cie 56 APO CME / Faculty of Construction Management Pin - 908797 neo 56 APO Internal E2W (Army) E2W (Navy' E2W (Design) E2 (Est)
E4 (Utility'
gin 191911 E6 (Arch)
E8 (Contract)
Aomation Celi - For uploading on the MES website please
Col Rajat Baijal
Digitally signed by Col Rajat Baijal
DN: c=IN, st=KASHMIR, o=E-IN-C Branch Army MOD,Automation Cell EINC, ou=nonnic-mail-admin, cn=Col Rajat Baijal, email=autocell-einc-army@nic.in Date: 2015.12.14 15:41:09 +05'30'