08 February 2012
I am giving service of Erection, commissioning and installation. I am also providing material like plant and machinery. i am confused between two catagory 1) Works contract 65(105)(zzzza)or 2)Erection comm and install 65(150)(zzd)
my question is under what catagory my service will be classified under following situations.
1) sale of goods is not taxed under vat Act? Billing of goods and service is not seperate. 2) sale of goods is not taxed under vat Act? Billing of goods and service is seperate. 2) sale of goods is taxed under vat act?
19 July 2024
The classification of your service as either a works contract (65(105)(zzzza)) or under erection, commissioning, and installation services (65(105)(zzd)) under Service Tax (now GST) depends on the nature and specifics of the service provided, particularly how it relates to the supply of goods and the execution of works.
Here’s a breakdown based on the scenarios you've mentioned:
### 1) Sale of Goods is Not Taxed under VAT Act - **Billing of goods and service is not separate:** - If you are providing a composite service where both goods (plant and machinery) and services (erection, commissioning, installation) are bundled together and billed as a single package, it typically falls under the category of **works contract** (65(105)(zzzza)). - In a works contract, the emphasis is on the supply of goods (plant and machinery) being incidental to the provision of services (erection, commissioning, installation).
- **Billing of goods and service is separate:** - If you bill separately for the supply of goods (plant and machinery) and for the services (erection, commissioning, installation), then the supply of goods would be treated separately as a sale of goods, and the services would fall under **erection, commissioning, and installation services** (65(105)(zzd)).
### 2) Sale of Goods is Taxed under VAT Act - **Supposing VAT is Applicable:** - If VAT is applicable on the sale of goods (plant and machinery), the service component (erection, commissioning, installation) would be treated separately under **erection, commissioning, and installation services** (65(105)(zzd)). - VAT and Service Tax (or GST) are typically mutually exclusive in their treatment, so the service tax or GST on erection, commissioning, and installation services would be calculated separately.
- **Supposing VAT is Not Applicable:** - If VAT is not applicable, the transaction may still fall under the works contract category (65(105)(zzzza)) if the supply of goods and services is not separately identifiable and are part of a composite contract.
### Conclusion: - The determination between works contract and erection, commissioning, and installation services hinges on how the supply of goods and services is structured in your contract and billing practices. - **Works Contract (65(105)(zzzza))**: Typically when goods and services are not separately billed and form part of a composite contract. - **Erection, Commissioning, and Installation Services (65(105)(zzd))**: When goods and services are separately billed, or if VAT is applicable on the goods portion.
It’s advisable to consult with a tax advisor or GST expert to ensure proper classification based on the specific details of your transactions and compliance with GST regulations.
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