Free-supplied materials excluded from gross value for service tax abatement under Notification No. 1/2006-ST

For abatement under Notification No. 1/2006-ST, materials supplied free of cost by the service recipient were not required to be included in the gross value of commercial and industrial construction service. The Tribunal followed the Larger Bench ruling in Bhayana Builders and consistent later decisions, which treated such free-supplied materials as outside the taxable gross value for computing the abatement. The assessee was therefore entitled to the abatement.

---

---

Issues: Whether, for claiming abatement under Notification No. 1/2006-ST, the value of materials supplied free of cost by the service recipient was required to be included in the gross value of commercial and industrial construction service.

Analysis: The assessee had included the value of materials used by it in providing construction service and claimed the abatement available under the notification. The dispute was confined to whether the value of cement and steel supplied free by the service recipient had to be added to the gross value for computing eligibility. The issue was already settled by the Larger Bench decision in Bhayana Builders and followed consistently by subsequent Tribunal decisions, which held that free-supplied materials by the recipient are not required to be included for the purpose of the abatement notification.

Conclusion: The value of free-supplied material was not required to be included in the gross value, and the assessee was entitled to the abatement under Notification No. 1/2006-ST.

Ratio Decidendi: For abatement under Notification No. 1/2006-ST, materials supplied free of cost by the service recipient are excluded from the gross value of construction service.

---