This query is : Resolved 

28 August 2008

One of our client is providing AMC for Telecome Equipements. I would like to know the provisions of WCT and Service Tax pertaining to such activity. Please Note that AMC billing is being done in Advance and the amount of material that may be required to be used for the AMC is neither ascertainable nor any benchmark exists for the same.

28 August 2008

At present the client is charging 12.36% Service Tax on the Basic Value of AMC and 12.5% as WCT ( DVAT) on 80% of the Basic Value, It doesn't seem to be correct.

28 August 2008

Can anyone throw some light on this issue?

S.Srinivasaraghavan (Expert)
28 August 2008

AMC attracts VAT, ST and TDS provisions.

CA. O.P. Agarwalla (Expert)
18 September 2008

Yes, it sounds incorrect.

You may ask clarification from your vendor regarding applicability of service tax on entire bill value.
VAT Act is clear that VAT will only be levied on the value of goods used in the execution of WC.
If the vendor fails to maintain, its account and accordingly higher VAT is leviable on him by way of adhoc deduction, why the consumer should bear it?
Further, in case of WC, I think that the VAT becomes payable only after apportionment or use of goods in execution of WC. However, this may be a debatable point and I would like to invite experts comments on the issue.

18 September 2008

Dear Mr Aggarwal,

The AMC provider is our client.We have reviewed the provisions in the DVAT as well as Service Tax, bt could not find any provision for justifying the exclusion of one tax on account of other.

It is not questionable that AMC comes under DVAT as Works Contract. Moreover, Annual Maintenance Contract is a taxable service "Management, maintenance or repair" as per Service Tax. Both are independent acts and does not provide exemption of any sort on account coverage under the other act. Hence Service Tax is also being levied on the total value of contract( which would exclude the value of DVAT supposedly included in the value of Contract.

In view of the above undertanding , the client is leving DVAT as well as Service Tax.

Works contract tax @12.5% is being levied at the 80% of the value of contract after allowing 20% for labour charges ( effective rate of DVAT 10%). Whereas the Service Tax is also being levied on the total value of contract @ 12.36%.

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