04 November 2008
We undertake jobs on EPC basis classified as taxable service classified under 65 (105) (zzzza) explanation (e).
All our jobs are for State Govt. departments or for local authorities for Irrigation or for Water supply schemes / sewage disposal schemes.
Prior to this classification, we used to discharge service tax for the taxable services like Erection, Commissioning & Installation, Consulting Engineer Services etc, for the labour component involved in the contract. Considering the fact that these buildings are not used for commerce or industry, the civil services were treated by us as exempted service.
Now, under the revised classification of WCT services, the valuation of gross taxable service would be Total value of the contract less transfer of property in goods + relevant VAT.
The query is explained mathematically as under:
Total contract value 100.00 Less: Transfer of property In material + relevant VAT 90.00
Gross value of service 10.00
The Rs.90.00 deducted above includes Rs.20.00 as the Civil portion of the contract, the break-up of Rs.20.00 is material + relevant VAT + labour + margin. My query is whether this Rs.20.00 will be exigible to tax under the service tax scheme because of the classification, i.e. Works Contract Services, even though the proposed civil structure is not going to be used for commerce or industry.
23 November 2008
Works contract services in a composite one. You cannot bifurcate the value of material and labour. ST is on the whole value of the contract. There is no exemption available under WCS for services rendered to govt.
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