Service tax liability on works contract

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Brijj Vaghela (Querist)

13 June 2013 Gentlemen,

My Client has Ready Mix Concrete Plant, they are doing work on works contract, they also apply excise on total amount of invoice.

My question is that, is there liability of service tax on excise invoice however it has been made for works contract

Please reply

Madhukar N Hiregange

Madhukar N Hiregange (Expert)

13 June 2013 Where a process amounts to manufacture there is no liability under service tax.

Ganeshbabu K

Ganeshbabu K (Expert)

13 June 2013 No service tax applicable if process amounts to manufacture.

1)Though reverse charge applies in case of works contract, reverse charge mechanism is only a mode of collection of service tax. That provision is not a levy of service tax. Thus, if an activity is not leviable to service tax, no service tax would be payable simply because that activity is covered under definition of works contract.

2)Moreover Any process amounting to manufacture or production of goods is not taxable service – Clause (f) of Negative List of services as per section 66D of Finance Act, 1994 introduced w.e.f. 1-7-2012.

The reason is that excise duty is payable if activity is ‘manufacture’.

Thanks & regards
Ganeshbabu k

Brijj Vaghela

Brijj Vaghela (Querist)

14 June 2013 Thanks Gentlemen

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