Re: exemption on paying service tax

This query is : Resolved

priya (Querist)
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02 August 2009 dear sirs,
we are doing statutory testing of LPG cylinders(domestic house - hold cylinders),along with the painting and printing work for which we receive money from the Oil companies.Out of which we are
spending nearly 65% on above raw materials.How can we make claim on
exemption on raw materials used while paying service tax on gross amount received under the tax head Repairs and maintanence? Or will it come under tax
head works contract

regards
priya

Dilip Darji

Dilip Darji (Expert)
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03 August 2009 Hello Priya.
There are two ways to claim exemption from payment Service Tax on paint used by you during repair activity.(1) To claim exemption under Noti.No.12/2003-ST. Under this Noti.exemption can be claimed only when the goods are sold. This is mainly for reapiring of vehicles, where the parts are sold. In your case, you are not selling paint but the same is used during the reparing but you are consuming paint duting the test/painting services. (2) To claim exemption under Works contract Service. Here also it is the same condition "Transfer of property in the goods involved in the excecution of such contract is liviable to as sale of goods". In your case, you are not selling paint but the same is used during the repairing but you are consuming paint duting the test/painting services.

Therefore you will have to pay full Service Tax on the value of services charged by you, which is inclusive of cost of paint. However, you can very well avail CENVAT credit of central excise duty, paid at the time of its purchase, subject to the other Conditions of CENVAT credit Rules.2004.