17 December 2008
A service provider rendering Commissioning and Installation services, charges his customer Works Contract Tax (WCT - a State levy) but not paying service tax on the grounds that Sales Tax is paid. The department says that WCT is not equivalent to Sales tax and involves both material and labour hence wherever WCT is paid service tax is to be paid on the whole contract value after due abatement. ST is not payable only in cases where the service provider is paying VAT. Is the departments view is correct?
19 December 2008
Basically the Installation and Commissioning service is identified under taxable service under service tax law. Service tax is to be levied on labour (service charges) and VAT has to be levied on material charges. If the contract involve both material and labour then VAT has to be paid on material and Service tax has to be paid on labour(service charges)after availing the deduction/abatements under the respective law. VAT is a state levy and Service tax is a Central levy, so tax has to be paid as charged in the respective law
19 December 2008
I am sorry. The questiion is not understood properly. What you have said is okay about VAT wherein the transfer of goods involved and VAT has to be paid on material value and service tax has to be paid on the labour value. But my question is about payment of Works Contract Tax (WCT) which is compunding scheme available only where material and labour is involved. My doubt is where both material and labour is involved which cannot be seggregated service tax has to be paid on the total value of the works contract of course after availing abatement. Whether this is correct or not? Further I beg to differ from other aspect. You said 'Service tax has to be paid on the labour (service charges) after availing the deduction/abatement under the respective law' Here I wish to state that if service tax is paid on labour charges alone you cannot avail the abatement. Only when both material and labour is involved which cannot be seggregated then only you can avail the abatement. Kindly post your views on both the aspects
23 December 2008
Incase of Erection Commission or Installation service, assessee has an option of paying tax after abatement of 67% i.e 4.07% or at compound 4.12% on total value. But to avail abatement there must some material portion another aspect to consider is input. Incase of abatement input is not available but in compound scheme input can be availed on input services but not input goods.
23 December 2008
Right. But the issue is prior to introduction of Works Contract Service ie., prior to 01/06/2007 only. As you said after introduction of Works contract services both abatement and compound is one and the same. MY question is whether both Works Cotnract Tax (or VAT) and Service tax is applicable on the same value or not?
CAclubindia
