Service Tax on Works Contract

This query is : Resolved

Kamlesh Modak (Querist)
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29 September 2010 Respected Sir / Madam,

We are a Pvt. Ltd. Company situated in Maharashtra. We are doing activity of Works Contract and doing a work of supply, fabrication, erection & installation of material. The work order issued by a customer is inclusive of all taxes & duties & hence we do back calculation, while paying all applicable taxes to such type of transaction.
1. We are paying excise duty @ 10.30% on material required for works contract and taking input credit material against excise liability.
2. We are paying VAT @ 8.00% on entire sale value & taking input credit of 64% against VAT liability.
3. We are paying Service Tax @ 3.399% (33% of 10.30%) on entire sale value under Erection & Commissioning category of service tax & taking input credit of services used for this activity.
We want to ask can we pay Service Tax @ 3.399% & still can take input credit of services.
Or
Whether we have to pay Service Tax @ 4.12% (composition) under Works Contract category of Service Tax, And if we are paying service tax under Works Contract category under composition scheme, can we take input credit of services used for this activity. We are not taking any input credit of material, as the same is taken against excise liability. There are no capital goods which are used for this activity.

Pls. guide under which category we should pay service tax

Regards
Kamlesh

CA Punit

CA Punit (Expert)
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29 September 2010 Where abatement is claimed, credit on input/input serives/capital goods cannot be availed.

When Service Tax is paid @ 4.12% under composition scheme, credit on input services (not inputs) & capital goods can be availed.

You can select the benificial option from above