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Regarding fabrication of tanks

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Kiran Kumar B

Student CA Final

29 Points Posted on 18 January 2015

Dear Sir,

Please clarify my doubt. We are the Contractors of IOCL. We fabricate 20kl to 75 Kl Petrol and Diesel Tanks to IOCL. The Raw Material (Mild Steel) for Tanks Supplied to us by IOCL on Jobworks Basis without transfering the ownership of the material. According to their instructions using their material at our factory we fabricate the tanks as per their drawings using some consumables like Welding Electrodes and Turnbuckles and handover the finished Tanks to their Retail Outlet (Petrol Bunks) place which are ready for erection. The erection will be done by others not by us.

Right now we are treating as works contract tax and paying Works Contract Tax @ 5% and Service Tax @ 4.944%.

Are we liabile for Central Excise Tax? or
Do we have to pay Service @ 12.36% treating as Job Works Charges?
Is our treatment (Treating as Works Contract) is correct?

Please suggest. Thanks in Advance.

Replies (1)

MJ Krishnamurthy

ACCT(Retd)

5757 Points Posted on 18 January 2015

When you are not supplying any material to the contractee it is not a works contract,it is only a job works contract. You need not pay any VAT.Get yourself assessed by the VAT department and ask to refund all the VAT paid so far. If it is possible revise your returns of past six months and claim refunds.If you are under composition scheme some problem may arise even in case of a little amount of material transfer,like red oxide painting etc.Whereas ST is leviable on the entire receipts.Some abatement is available. Consult an expert for details along with your documents such as invoices,purchase bills,contract agreement,returns etc......mjk