Service tax credit on wct

Queries 3434 views 2 replies

Jiten

167 Points Joined June 2007

Dear Sir,

Our company A ltd is working as a Principal contractor for construction work given by xyz ltd and we have appointed another co.( B ltd ) as subcontractor.

A & B are registered under composition scheme .

Query- B ltd raise invoice to A ltd and charge service tax under composition scheme and A ltd means principal contractor raise invoice to XYZ ltd and charge service tax

At the time of payment of service tax can A ltd take credit of service tax which he has paid to B ltd . because under composition scheme we can not

Take credit on INPUTS but can take credit for input services & capital goods.

Work contract services are covered under input services or not.

Also suggest what happen if B ltd not registered under composition scheme .

Is there any change if A ltd do agreement with XYZ ltd that they will charge on actual cost ( not profit ) as a reimbursement of expenses. In this case A ltd have no need to

Charge service tax from xyz ltd ? Because no service charge , no profit .

Plz give your reply according current budget .

Thanks & regards

Jitendra

Replies (2)

Kapil

68 Points Joined May 2012

i believe work contract service is covered in input service for specified service as per rule 2(l) of CCR 2004.

If B is not registered in compositon scheme then also cenvat credit can be availed by A only on input service and capital goods as A is registered for composition scheme.

work contract include the total value of contract hence reimbursement of exp. may not escape service tax under composition scheme.

Pinky Agarwal

Chartered Accountant

426 Points Joined August 2010

Originally posted by : Jiten
	Dear Sir, Our company A ltd is working as a Principal contractor for construction work given by xyz ltd and we have appointed another co.( B ltd ) as subcontractor. A & B are registered under composition scheme . Query- B ltd raise invoice to A ltd and charge service tax under composition scheme and A ltd means principal contractor raise invoice to XYZ ltd and charge service tax At the time of payment of service tax can A ltd take credit of service tax which he has paid to B ltd . because under composition scheme we can not Take credit on INPUTS but can take credit for input services & capital goods. Work contract services are covered under input services or not. Also suggest what happen if B ltd not registered under composition scheme . Is there any change if A ltd do agreement with XYZ ltd that they will charge on actual cost ( not profit ) as a reimbursement of expenses. In this case A ltd have no need to Charge service tax from xyz ltd ? Because no service charge , no profit . Plz give your reply according current budget . Thanks & regards Jitendra

Dear Sir,

Input tax credit of service tax paid by you on works contract service can be taken irrespective of the fact whether the sub contractor is under comp[osition scheme or not...

Regards,

Pinky Agarwal..