| # Overview of tax in projects This functionality is specific for India. This topic provides an overview of tax calculation methods and tax exceptions for a project. Tax calculation methods A project can use one of the following tax calculation methods: Identification Use this method when material and service components for each element or activity can be identified. The VAT is applied on the material component of the element or activity. The service tax is applied on the service component of the element or activity. Composition Use this method when there is no segregation of material and service components for each element or activity. VAT is applied on the total contract amount. The service tax is applied on the fixed percentage of the service component in the contract amount. The percentage of the service component can be different for each project. Tax exceptions for a project VAT and service tax are exempted for projects in the following areas: Special Economic Zone (SEZ) Export Oriented Unit (EOU) Deemed Export Zone (DEZ) |