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ST on electical contact

Raveendranath B V (Proprietor) (32 Points)

09 January 2010

I have a query on service tax. One of my prospective client is engaged in electrical contract providing service of erecting power lines. His turnover for the last three years is more than crore each year. He has purchased materials from registered dealers only. He is filing VAT & IT returns. Not registered under Service Tax Act. Now wants to get registered. What should be the course of action? Whether the abatements/cenvat credit etc available to him?

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2 Replies

chamatkaribaba (Practicing Indirect Tax) (97 Points)
Replied 09 January 2010

From the facts, it seems that ur client is in the business of procurement and erection contract. This is a taxable service. It is better to get registered with Service tax department before Show cause Notice comes. Theclient has to pay service tax with interests before scn to avoid any penalty.

Notification No. 12/2003 gives u benefit of deduction of goods supplied during the construction.

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Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 11 January 2010

The liability for the same exist in my view from 1.6.2007 under works contract entry. From 1.6.2007 to 1.3.2008 he is liable at 2.06% and thereafter at 4.12% if he opts for composition under ST. He would be eligible for the input services credit as set off. Balance along with interest @ 13% is payable.

If the customer is under service tax or central excise the customer is eligible for credit. Contractor may confirm from cusotmer whether credit can be availed. If so that amount ius not loss and only interest wouldbe the cost.