Reverse charge on fabrication work

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 September 2013 Dear Sir,

I am S. Venkatesh, I am Working in Public Ltd Co, and we are receiving services for fabrication work on contract basis by contractor.

Based on work order the bill being prepared and he brings the material and do the fabrication work for our company. We are paying him based on bill raised. What about service tax? Whether reverse charge applicable or not? If yes, whether to be considered as Labour Charges, or Man power Supply, Or Work Contract basis.

We are totally confused on this matter. Please help

sudarshan

sudarshan (Expert)
Follow

06 September 2013 if your activity is Manufacture and the job worker does intermediary work in completing the process, ST is exempt for him. If he is supplying labour only reverse charge will apply

Querist : Anonymous

Querist : Anonymous (Querist)

06 September 2013 We are manufacturer of Liquor. We are not the manufacturer of Fabrication. But in our factory we need maintanance job, where the contractor is doing the fabrication work such as fitting, etc.

He is doing the job inside the factory. If he is doing the job work then reverse charge apply or not? If so, under which category we have to consider, whether under manpower, or labour work. etc? I think now the matter is clear now.

Upgrade to CAclubindia Pro. Subscribe Now!

sudarshan

sudarshan (Expert)
Follow

06 September 2013 when the job worker is not doing intermediary service, then ST is chargeable. If it is works contract, then Reverse charge is applicable, otherwise he has to charge ST in his bill

Querist : Anonymous

Querist : Anonymous (Querist)

06 September 2013 thanks. If it is applicable then on what rate? I want clear picture please. In reverse charge both Service provider & Service receiver both apply. As service receiver how much we should charge.

This is my question? I want rate please?

sudarshan

sudarshan (Expert)
Follow

06 September 2013 first of all find out whether it is Works contract. if it is , then 50% payable by receiver and 50% by provider

CA Suresh Jain

CA Suresh Jain (Expert)
Follow

07 September 2013 If the service provided by the contractor is not related to building it would or even related to building but all the material if supplied by you then both the cases it shall not be a works contract. The service provider only have to charge service tax @ 12.36%.

sudarshan

sudarshan (Expert)
Follow

07 September 2013 DEFINITION OF WORKS CONTRACT

Section 65B(54) defines “Works Contract” as

“Works contract means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property”

There are 2 parts of this definition

A contract where transfer of property in goods involved is leviable to tax as sale of goods, AND

Such contract is for carrying out certain specified activities in relation to Movable Or Immovable property.

By this definition, the scope of “Works Contract” has been vastly increased by inclusion of “Movable Property” in the definition. Earlier, service tax works contract is restricted to construction related activities, but now all kinds of works contract activity is liable to be taxed under Service Tax.

Upgrade to CAclubindia Pro. Subscribe Now!

CA Suresh Jain

CA Suresh Jain (Expert)
Follow

08 September 2013 Yes, Mr. Sudarshan is right.