Works Contract Service vs Errection Commissioning and Instal


21 November 2009


We are air conditioning works contractors. My issue befor implimentation of Works contract service we have followed the Errection Commission & Installation Service. After the implimentaion we are following the Works Contract Service. You know that as per ECI service we have to take 67% abatement and on the 33% we have to pay tax. Before service tax rate is 12% and works Contract service rate is 4%. Now Service tax rate has came down for 10%.

May we change to the ECI service. Once I read any where that " if there is any Sales tax element in the receipt against the service of ECI, Service provider has to pay tax in Works Contract service only". Is this correct, if correct please advice me the notification No.

Please clear my doubt.

Rajendra Prasad (Querist)
23 November 2009


I have find out the answer to this. Before the works contract service there is Errection, Commissioning and Installation Service. for this service we have to pay tax on 33% after taking abatement of 67% (Notification 1/2006 Dt.1/3/2006 of Service tax) at what the rate is applicable. Before 12% and now 10% on that 2% education cess and 1% Higher education cess. After the introducing the Works contract service, as per the Circular No.B1/16/2007-TRU Dt.22/5/2007 clarifies that "Contracts which are treated as works contract for the purpose of the levy of Salve Tax/VAT shall be treated as Works Contract for the purpose of levy of Service Tax. This clear from the Definition under section 65(105)(zzzza)". So we have to pay directly 4% Service Tax unde Works contract tax and Education Cess 2% and Higher Education cess 1%.

BALU V (Expert)
16 February 2010

WCS is only an optional scheme and can be availed after filing an option. Depending upon the project you can always pay ST either under CAI or WCS

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