Go AD-Free with CAclubindia Pro and get a FREE CCI Coffee Mug. Subscribe Now!

Service tax on erection, installation and commissioning

Krishna Prasad (Partner) (260 Points)

06 June 2016

my client is a partnership firm. it is raising bills for sale and service separately to its clients. the nature of work is sale of equipment and erection, installation and commissioning of supplied equipment.

Client is paying vat directly on sales. regarding service tax on how much portion service tax is to be paid and at what rate.

Please provide detailed explanation.

Reply
Follow
Share

3 Replies

CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 07 June 2016

The service portion involved in the execution of Original works is 40% of the total works contract and the service portion involved in the execution of works contract other than original works is 70% of the total works contract. Service tax is applicable at the rate of 15%(including KKC)

Upgrade to CAclubindia Pro. Subscribe Now!

Chirag Parmar (Service) (65 Points)
Replied 07 June 2016

Your client has 2 options.

1. pay service tax on service portion under rule 2A(i) of Service tax (Determination of value) rules, 2006

2. If value is not determined under option 1, pay service tax under rule 2A(ii) of the said rules on total amount

However, credit of inputs is not available in the second option. Further, credit of input services also not available except it is received for specified services (see the definatin of input services).

In second option, service tax is payable on 40% of total amount charged if it is for original works otherwise it would be 70% of total amount charged.

karan jit singh (Consultant) (1299 Points)
Replied 11 June 2016

Originally posted by : Krishna Prasad
	my client is a partnership firm. it is raising bills for sale and service separately to its clients. the nature of work is sale of equipment and erection, installation and commissioning of supplied equipment. Client is paying vat directly on sales. regarding service tax on how much portion service tax is to be paid and at what rate. Please provide detailed explanation.