Exemption under notification No/1/2006 ST dt.01.03.06
This query is : Resolved
07 February 2008
Dear sirs
Our client is a works contractor. For completing the works they uses the material purchased from outside as well as those supplied by the contractee.
For availing exemption under notification No.1/2006 ST Dt. 01.03.06 is it necessary to include the value of material supplied by the contractee ( as free of cost ) in the bill raised by the contractor.
Is there any disqualification in availing the exemption under this notification because of the use of material supplied by the contractee.
Our client is a works contractor. For completing the works they uses the material purchased from outside as well as those supplied by the contractee.
For availing exemption under notification No.1/2006 ST Dt. 01.03.06 is it necessary to include the value of material supplied by the contractee ( as free of cost ) in the bill raised by the contractor.
Is there any disqualification in availing the exemption under this notification because of the use of material supplied by the contractee.
07 February 2008
IN RELATION TO WORKS CONTRACT AND SERVICE TAX THEREON,I GIVE BELOW THE LATEST NOTIFICATION BY GOVT.
PL. FOLLOW SAME AND IT IS VERY CLEAR ABOUT THE OPTIONS NOW AVAILABLE.
R.V.RAO
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(Department of Revenue)
New Delhi, the 22nd May, 2007
1 Jyaistha, 1929 (Saka)
Notification No. 32/2007-Service Tax
G.S.R. (E).þu In exercise of the powers conferred by sections 93 and 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:-
1. Short title and commencement.¨C (1) These rules may be called the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.
(2) They shall come into force with effect from the 1st day of June, 2007.
2. Definitions.¨C In these rules, unless the context otherwise requires,-
(a) ¡°Act¡± means the Finance Act, 1994 (32 of 1994);
(b) ¡°section¡± means the section of the Act;
(c) ¡°works contract service¡± means services provided in relation to the execution of a works contract referred to in sub-clause (zzzza) of clause (105) of section 65 of the Act;
(d) words and expressions used in these rules and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act.
3. (1) Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to two per cent. of the gross amount charged for the works contract.
Explanation.- For the purposes of this rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract.
(2) The provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004.
(3) The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract.
[F. No. B1/7/2007-TRU]
(G.G. Pai)
Under Secretary to the Government of India
IN RELATION TO WORKS CONTRACT AND SERVICE TAX THEREON,I GIVE BELOW THE LATEST NOTIFICATION BY GOVT.
PL. FOLLOW SAME AND IT IS VERY CLEAR ABOUT THE OPTIONS NOW AVAILABLE.
R.V.RAO
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(Department of Revenue)
New Delhi, the 22nd May, 2007
1 Jyaistha, 1929 (Saka)
Notification No. 32/2007-Service Tax
G.S.R. (E).þu In exercise of the powers conferred by sections 93 and 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:-
1. Short title and commencement.¨C (1) These rules may be called the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.
(2) They shall come into force with effect from the 1st day of June, 2007.
2. Definitions.¨C In these rules, unless the context otherwise requires,-
(a) ¡°Act¡± means the Finance Act, 1994 (32 of 1994);
(b) ¡°section¡± means the section of the Act;
(c) ¡°works contract service¡± means services provided in relation to the execution of a works contract referred to in sub-clause (zzzza) of clause (105) of section 65 of the Act;
(d) words and expressions used in these rules and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act.
3. (1) Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to two per cent. of the gross amount charged for the works contract.
Explanation.- For the purposes of this rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract.
(2) The provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004.
(3) The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract.
[F. No. B1/7/2007-TRU]
(G.G. Pai)
Under Secretary to the Government of India
08 February 2008
pls inform me is it necessary to include in the bill raised, the value of gooods supplied by awarder at free of cost, for availing the bendefit of notification no.1/2006 ST Dt.01.03.06
12 February 2008
To answere your question in two liners, the free goods supplied will have to be included in the contract value in exercising 1/2006.
There is an ongoing debate and L & T has been granted stay in the matter that the value of goods supplied to the contractor shall not be included in the value of contract.
It is wait and watch, till such time advise your client to pay the service tax under protest, because if L & T is given a favourable judgement then you have the refund on hand
https://www.caclubindia.com/homepage/DM%20Associate/
There is an ongoing debate and L & T has been granted stay in the matter that the value of goods supplied to the contractor shall not be included in the value of contract.
It is wait and watch, till such time advise your client to pay the service tax under protest, because if L & T is given a favourable judgement then you have the refund on hand
https://www.caclubindia.com/homepage/DM%20Associate/
31 May 2012
The Supreme Court has upheld the decision of the Andhra Pradesh High Court in the L&T case.
The Andhra Pradesh Commercial Tax Authorities had demanded VAT from the main contractor on the value sub contracts. The sub contractors were registered dealers and had paid VAT on the value of sub contracts executed by them. The plea of the main contractor that this will result in double taxation was not accepted by the Authorities. The Andhra Pradesh High Court vide its decision dated 12 Oct 2006 upheld the plea of the main contractor.
The Andhra Pradesh Commercial Tax Authorities had demanded VAT from the main contractor on the value sub contracts. The sub contractors were registered dealers and had paid VAT on the value of sub contracts executed by them. The plea of the main contractor that this will result in double taxation was not accepted by the Authorities. The Andhra Pradesh High Court vide its decision dated 12 Oct 2006 upheld the plea of the main contractor.
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