service tax on works contract

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 February 2011 A business person(dealing in fabrication ) pays compounded vat @3% + cess , on works contract(KVAT) and has total t/o of more than rs.10 lakh this f.y. Is he supposed to be registered under service tax as per provisions of service tax on works contract and if so, will he get the general exemption benefit and liability only arise on the sales above Rs.10 lakhs . Also should he apply for service tax under composite scheme ?

CA Unnikrishnan Nair N

CA Unnikrishnan Nair N (Expert)
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23 February 2011 Work contract and related composition under service tax is available only for commercial/residential construction and erection installation. If your fabrication work is in relation to above works then you can opt for composition.If value of materials is inseparable then Rs.10 exemption is only for labor portion as per Noti.12/2003. Otherwise gross contract amount is reckoned for Rs.10 lakhs.

Querist : Anonymous

Querist : Anonymous (Querist)

23 February 2011 Let me make it more clear - The work carried out is more of mosquito proof doors & windows wherein CT under VAT is paid..since service tax is leviable only on specified types of works under works contract , wherein erection , commissioning or installation is involved for P & M, equipment, structures etc , will this include the said work?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Here’s a clear explanation addressing your query on **service tax on works contract related to fabrication of mosquito proof doors & windows** and related points:

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### 1. **Applicability of Service Tax on Works Contract**

* **Service tax on works contract service** (as per Notification No. 12/2003- ST) is leviable primarily on contracts related to:

* Construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of **immovable property** (residential, commercial complexes, factories, etc).
* Erection, commissioning, installation, completion of **plant and machinery** (P\&M) or equipment.

* **Fabrication of mosquito proof doors and windows** generally involves manufacturing and supplying movable goods or parts, **not erection or installation related to immovable property or plant & machinery.**

* Therefore, **if your work is limited to manufacturing and supplying doors & windows, and VAT/CT is paid on this, it will not qualify as works contract service liable for service tax.**

* However, if your fabrication includes **erection, installation or fitting at site** as part of the contract, it might attract service tax under works contract or erection/installation services.

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### 2. **Threshold and Registration**

* The threshold for mandatory service tax registration and payment is **Rs. 10 lakh turnover per financial year** (aggregate taxable services).

* If the **service qualifies as works contract service**, then only turnover exceeding Rs. 10 lakh will be taxable.

* The Rs. 10 lakh exemption applies to the **service portion (labour & service component)**, not the full contract value if material cost is inseparable.

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### 3. **Composition Scheme**

* Composition scheme for service tax on works contract is applicable only for **construction/erection/installation of immovable property (residential/commercial buildings, factories).**

* **It does NOT cover fabrication works like mosquito proof doors/windows** unless these form part of erection/installation of immovable property or plant & machinery.

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### **Summary:**

| Issue | Answer |
| -------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- |
| Is fabrication of mosquito proof doors & windows a works contract service? | Generally **No**, unless erection/installation at site is involved. |
| Is service tax applicable on fabrication supply alone? | No, supply of goods with VAT paid is not liable to service tax. |
| Threshold for registration & payment | Rs. 10 lakh turnover in taxable services |
| Applicability of composition scheme | Only for construction/erection/installation of immovable property, not for fabrication supply alone |

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### **What should you do?**

* Analyze your contract details: Is erection/installation part of your service?
* If yes, consider service tax applicability on that portion.
* If no, then service tax is not applicable on your fabrication supply which is already covered under VAT.

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If you want, I can share relevant legal references and notifications for your specific case. Would you like that?

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