Issue of foc material

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 November 2011 YSR limited engages L and T for erection and commissioning of its machinery.

It issues Machinery to contractor on FOC basis for using in the erection and commissioning.

will value of FOC material be included in assesable for charging service tax ?

regards,

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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10 November 2011 Abatement is available under Notification No. 1/2006 dt. 01.03.06 for erection & commissioning if FOC value is also included in gross amount for the purpose for calculating taxable value. So if you are taking abatement then it has to be included. And if not, then only labour charges will be charged to service tax.

Querist : Anonymous

Querist : Anonymous (Querist)

11 November 2011 Not really satisfied. any case laws to support the answer.

PUNEET GOYAL

PUNEET GOYAL (Expert)
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19 November 2011 Answer of the above query depends on whether L&T opted for composition scheme or not. If opted for composition and service falls under works contracts services then value of all goods or cost will be included while applying concessional rate of service tax (i.e. 4.12 %). In this case value of all the material of goods will be added whether provided by the client free of cost or purchased by L & T on its own. For more detail read Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.

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