Service Tax - Construction Services in respect of Commercial

abatements 5821 views 2 replies

Sushma Mevacha

Executive

394 Points Joined July 2009

If A is providing engaged in providing the service of "Construction Services in respect of Commercial or Industrial Building" and he is paying service tax & availing the benefit of 67% abetment.

Now, in regards of this services, he is providing 2 types of services.

1. Labor with material (he is billing for total gross amount) and benefit of 67% abetment.

2. Only labor services (No material) in this case he is charging service Tax on 100% amount.

Now, in the Notification No. 15/2004-Service Tax for the said services it is said that

"Provided that this exemption shall not apply in such cases where –

(i) the credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004; or

(ii) the commercial concern has availed the benefit under the notification of the Government of India, in the Ministry of Finance, (Department of Revenue) No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R. 503 (E), dated the 20th June, 2003]."

Now our client has got contract for Construction from B, but he will only supply labor for that.

And A has given subcontract to C.

In the same regard, C will bill to A and charges service tax on 100% value (No abetment will be given) and A will bill to B.

In this view, here No abatement is available for three of them.. Can A take credit of Service Tax paid to C as it is INPUT SERVICES???

Replies (2)

Guest

The question of taking abatement is a trickier problem. The department states that if the service provider takes or taken input credit for any of his construction, then he is not eligible for abatement and hence for all construction contracts they have to pay full servic tax and cannot take benefit of abatement.

However, CESTAT, Ahmedabat, in the case of SMP, in its interim order stated that construction contracts are on case to case basis and the service provider is eligible to take input credit for certain projects and may opt for abatement for other cases. Final judgement has not come.

It is departments interpretation that service provider is not eligible to take the benefit of abatement if he has taken input credit, whereas the law does not seems to say so because, if the service provider takes input credit in the year 2004, is he not eligble to take the benefit of abatement in the year 2010. There are so many questions involved whether the inputcredit meant is for that particular financial year, or the life of the service provider.

As of now it is debatable, and you have to take chance.