Service tax on Works Contract

This query is : Resolved

Ruchi Jain (Querist)
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01 November 2007 Dear Sir/ Madam,

I am facing a query for which i have not been able to get a clear answer.
My Query is that in case of contractors engaged in construction of residential/ commercial complex, who are providing only labour i.e where they have entered into a contractor with the builder for construction and the material is supplied by the builder,(for civil construction, flooring, electrical and finishing services) whether such contractors can get their registration changed form the head Construction of residential/commercial complex and get themselves registered under works contract to take the benefit of concessional rate of service tax. Also would it be advisable for them to do so?

I would be waiting for your response.
Thank you,
Yours truly,
Ruchi Jain.

Dayal

Dayal (Expert)
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02 November 2007 Before seeking such change in registration kindly bring about the nature of service rendered in all such instances substance is more important than form.

Just for the sake of abatement switch over will not suffice, justification needs to given for such change over.

After changeover what would be the service that would be rendered whether it would be only construction of residentiol / commercial complex or something else?

CA Prasanna Krishnan V

CA Prasanna Krishnan V (Expert)
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02 November 2007 Dear Madam

If atleast a portion of your service involves your own materials and if you are subjected to State VAT I do not see any hindrance in switching over to Works Contract Service. You can just charge 2 % compounded service tax and ensure that your rates are quite competitive. Please decide after ensuring the requirements mentioned above.

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Dayal

Dayal (Expert)
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05 November 2007 For works contract, essential requirement is that one should be paying works contract tax. If a person is doing only labour work, he is not liable to pay works contract tax under State sales tax law. Obviously, he cannot come under the definition of 'works contract service'. The definition is quite clear and specific on this issue