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Abatement on erection, installation and commissioning

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Tanmay Mody

Article

22 Points Posted on 04 June 2012

Hi,

I have a query regarding abatement provided by notification no. 1/2006-Service Tax on Erection, Installation & Commissioning services.

For an example, suppose A Ltd. enters a composite contract of Rs. 100 for installation of elevators. (These elevators are not supplied by A Ltd. They are only installing the same.) Now, the contract is a composite contract and hence, involves both materials and labour. However, the material component involvement (consumables, accessories, parts, elevator shafts) for A Ltd. is hardly 5% of the contract value i.e. Rs. 5. Rest Rs. 95 is towards labour.

Whether in this case, the abatement of 67% as provided in the notification can be availed?

Also, it would be a really big help if a case law could be provided in this regard. I can also elaborate further if any other facts are required. Kindly comment and let me know.

Thanks,

Tanmay Mody

Replies (1)

Shreenivas S.Dotihal

senior officer

65 Points Posted on 06 June 2012

Abatement of 67% can be availed provided contractor has to bill whole amount including value of material supplied by A ltd. for this A ltd has to raise invoice on material (for example :5% total value) supplied to contractor. based on Gross amount charged mean any value of material received by service receiver by referring service tax valuation rules. for more clarification see the service tax valuation rules.