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Service tax on repairs and maintainence

07 August 2014

Members,

My query is relating to the provision of service as to repairs and maintenence of Electrical Transformers.

The nature of the activity is such that if total value of contract by tender is Rs. 50,00,000 the bill for Labour is raised for 7,00,000 and the rest is billed as materials and VAT is paid on such.(for example)

My contention is that before 01/07/2012, the cover of notification 12/2003 shall be avaliable and thus service tax shall only applicable on 7,00,000.

Due to the complexities in the new law governing service tax after 01/07/2012, what will be the effect on such contract.

Please advise,

CA Saurabh Patel

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2 Replies

Madhu H S ( ) (114 Points)
Replied 07 August 2014

Dear Saurabh Since separate invoice has been issues by the service provider / contractor for service and supply components, the nature of contact do not come under the purview of 'Works Contact'. Hence the question of valuation of service under composition scheme (as per Service Tax Valuation Rule, 2006 as amended by Notification no. 11/2014) does not arise. So, in the above stated example Service tax is applicable only on Rs. 7 lac (i.e on labour component) @ 12.36%. Hope this clarifies.