Composite service tax

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As per Service tax rules 12.36 % tax is charged on labour part. However if client issues order which consist of supply and erection both, we charge composite service tax @ 4.944% of total order. My query is that 

"  a contract where quite a lot of items are issued free to us and we do installation of these free issue items. Which means contract has few rate for erection of free issue items and few rates are supply & erection . Undersuch circumtances, can we operate composite service Tax @ 4.944 % or not. If not why and what is tax service tax applicable 

Regrads

Naresh 

Replies (2)

In this situation composite service tax 4.944% is applicable on supply and installation of items + 4.944% on cost of free issue material.

In case of works contract abatement of 60% is availabe under original works. The reason behind abatement is to allow deduction on account of material.

Hence, all material incuding that is supplied free of cost should be included. Even if few material is used by you, dept may deny the benefit of abatement. Another option is that you may claim actaul deduction of material (if bifurcation is possible) and pay service tax on balance amount at full rate.

 

Regards,

Nirav Worah

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