Service tax under which head?

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SIJU VARGHESE (Querist)
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26 July 2016 Dear Sir,

A Contractor is doing some fabrication works like Handrail, Gate etc.in a Residential Complex.
Under which head he has to take Service Tax Regn? He is doing labour contract works and works contract.

As per my knowledge, Labour Contract should be under "Erection, Commissioning and Installation Service" , and Works Contract under "Works Contract Service".

But I'am confused with the definition of 'Construction of Complex', in which all finishing works also will be included under this head.

(i) “Construction of Complex” means —
(a) construction of a new residential complex or a part thereof; or
(b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or
(c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex;
(Section 65(30a) of the Finance Act, 1994)

Please reply

CA AJAY KUMAR AGRAWAL

CA AJAY KUMAR AGRAWAL (Expert)
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26 July 2016 It seems that the contractor is himself fabricating, supplying & fitting said hand rails, gates & other items in residential complex. The property in said goods (handrails, gates etc) passes to buyer in course of above work. It involves both (supply & labour) In my view it is clearly covered u/s 66E (declared services) as Works Contract Service. Regarding question who has to deposit tax & in which proportion, the status of service provider & service receiver is to be seen.

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SIJU VARGHESE

SIJU VARGHESE (Querist)
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26 July 2016 Thanks for your reply sir.

Sir, the party is doing both labour contract without supplying any material and also doing works contract by supplying materials.
He is doing contract work for builders and also for flat owners directly.

I just want to confirm,

1. Whether the Work including supply of material comes under "Construction of Residential Complex" or "Works Contract" Service? and
2. Whether the work without including supply of material comes under "Erection, Commissioning, and Installation" or under any other head?

Once again thanks for spending your valuable time.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2025 Great question! Let me clarify the service tax classification for these scenarios:

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### 1. **Work including supply of materials**

When the contractor **fabricates, supplies, and fits items** like handrails, gates, etc., and **the property in goods passes to the buyer** as part of the contract, this is **Works Contract Service** under service tax.

* According to **Section 66E** of the Finance Act, 1994, **Works Contract Service** covers contracts involving both **labour and supply of goods**, where the property in goods passes to the client.
* Also, the **definition of "Construction of Complex"** (Section 65(30a)) applies when the contract is for a **residential complex or part thereof**.
* **Works contract service covers construction of residential complex including finishing services** (glazing, painting, carpentry, fencing, railing, etc.) — so your contractor’s work with supply of materials and installation fits here.

**So: If the contractor supplies materials *and* does installation/fabrication for a residential complex, it comes under “Works Contract Service” (declared service).**

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### 2. **Work without supply of materials (only labour)**

If the contractor **only provides labour and services without supplying any material**, then:

* The contract is for **labour only**, not a works contract.
* This service can be classified under **Erection, Commissioning and Installation Service** (ECI service), **if it involves erection or installation** of equipment or structures.
* However, **if it is just labour without erection/installation**, it might fall under **Manpower Recruitment/ Supply** (if supplying manpower), or **any other relevant service**, but typically for fabrication and installation labour, **Erection, Commissioning and Installation Service** is appropriate.

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### Summary:

| Situation | Applicable Service Tax Head |
| --------------------------------------------- | --------------------------------------------------------------------- |
| Labour + supply of material (property passes) | **Works Contract Service** (declared service) |
| Labour only for erection/installation | **Erection, Commissioning & Installation Service** |
| Labour only (no erection/installation) | Depends on nature; possibly Manpower Supply or other relevant service |

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**Additional Notes:**

* Builders/flat owners receiving the service should check if reverse charge applies (usually on works contract, service tax is paid by the contractor).
* Abatement rules for works contract service also apply (typically 70% abatement, paying tax on 30% value).

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If you want, I can help with sample invoice formats or tax calculation examples based on these heads! Would you like that?

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