EPC contract - Agreement

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karthik P (Querist)
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30 November 2010 For development of a 1 MW solar project, our company decided to give it to a German Company on EPC basis, where service tax is to our account. we wish to divide the contract into supply and service parts but Germany party is insisting on single contract. How does it affects us with respect to Service tax. Of Rs. 13 crores contract value, the value of engineering and the civil works which attracts the service tax is only Rs. 3 crores. If we enter into a single contract with true values assigned to supply, engineering & civil works on what value we are liable to pay service tax?

will the department asks us to pay service tax on Supply part also? whether we need to sign a single contract with values assigned to each item or multiple contracts.

Rajesh Kumar

Rajesh Kumar (Expert)
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30 November 2010 In this particular case, separate contract should be entered into. When the goods supplied shall enter into, on which Custom Duty is required to be paid. For the purposes of Custom Duty, in any case value of goods are required.
It is advisable that in the same contract, both the things (goods & services) may be incorporated. Service Tax is required to be paid on service part only.