construction services

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sheth rajesh (Querist)

16 May 2008 Hi,
my query is :

My client is providing construction service to a commercial entity under a contract. As per contract steel and cement are provided by the receiving company while other input like sand, kapachi, stone,bricks etc. are to be purchased by the service provider. My client has opt for abatment and has paid service tax on 33% of contract amount. He has not added the value of cement,seteel provided by the service receiptent . He has not claimed cenvet credit for input nor has availed benefit under notification no. 12/2003. He is thus eligible for abatement as per notification 15/2004.

The service tax department claim that as the contract is not of composite nature abatment can not be claimed and want to raise demand on 67% of contract value for the period from 1/9/2004 to 30/09/2005. They want to apply circular no. 1/2006 for the captioned period. After Oct.-05 the service provider has paid service tax on entire amount including the value of material supplied and abatement is not claimed.

KIndly guid the service tax department's propose action to disallow abatemnt for the period from 1/9/2004 to 30/9/2005 on the ground that contract is not of composite nature is justified

CA Rajesh Sheth

CA. Subodh Kumar 9864367665

CA. Subodh Kumar 9864367665 (Expert)

19 May 2008 In my opinion, AO is right in applying this, as said in Notification No.1/2006 exclude Section 25(b)-(c)-
But he is not right in applying this before its applicability. However the word “composite contract” is just combination of contract where one can supply goods with service also. As such There is evasion of tax on cement and steel goods. In this case he can hardly add this two components to recalculate tax liability.

We can further discuss to resolve this issue if u have any query call me up 9864367665
CA subodh Kuamr

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