Clarification on Taxation of Works Contracts Under Service Tax Law Effective July 1, 2012: Key Supreme Court Decision

The manual discusses the taxation of works contracts under service tax law, effective from July 1, 2012. A works contract involves the transfer of property in goods, taxable as a sale, and includes activities like construction, repair, and installation. The Supreme Court's decision in Bharat Sanchar Nigam Limited vs. Union of India clarifies that composite transactions, except for works and catering contracts, cannot be split into separate sales and service contracts. The dominant nature test determines whether a transaction is primarily a sale or service, except in works contracts where the service portion is taxable. The manual also clarifies that pure labor contracts are not works contracts and outlines how to determine the service portion in works contracts.

---

---

---