MAINTENANCE & REPAIR SERVICES

This query is : Resolved

SANJEEV GUPTA (Querist)
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25 July 2007 DEAR SIR,
PLS. CLARIFY THE FOLLOWING:

A PVT. LTD. CO. PROVIDE MAINTENANCE, MANAGEMENT AND REPAIR SERVICES TO A SUPER MARKET CONTAINING ABOUT 200 SHOPS. IT CHARGES RS. 1500 PER MONTH FROM EACH SHOP FOR THE FOLLOWING SERVICES:

1.CLEANING
2.WATER & SEWERAGE
3.ELECTRICITY
4.LIFT OPERATION
5.GENERATOR RENT
6.MATERIAL USED IN PROVIDING SERVICES

CAN WE DO ANY TAX PLANNING TO SAVE SERVICE TAX. IF YES, HOW ?

Shashi Mohan Jha

Shashi Mohan Jha (Expert)
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25 July 2007 Please check, In case the material for all the above services can be arrange by the shops/billed seperatly.

Shyam Lal Naik

Shyam Lal Naik (Expert)
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25 July 2007 It appears that the material used in providing the service can not be claimed as exemption.

The exemption notification No. 12/2003 exempts the value of goods and materials SOLD by the service provider.

In your case, you are using the materials for providing the service, not selling them(You are not transfering the ownership of the material used).

Hence, the exemption is not applicable in this case.

You can take benefit of Cenvat Credit.

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Shashi Mohan Jha

Shashi Mohan Jha (Expert)
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25 July 2007 But arrangements can be made where material would be provided by shops (off course arranged by the Pvt Company). Shops can also get benefit of these expenses and Pvt company can save service tax

Shyam Lal Naik

Shyam Lal Naik (Expert)
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26 July 2007 The draft circular of the CBEC says, "Any goods used in the course of providing service are to be treated as inputs for providing the service and accordingly, cost of such inputs should form integral part of the value of taxable service."

I my opinion, the above arrangement will reasult in undervaluation of taxable service.