Sercice tax liability if some materials supplied by contractee

[Bhairob Chandra Bor]

Dear Sir,

Kindly clarify whether the gross up is required to calculate the service tax if iron & steel rods purchased by contractee and used in the construction of a building? This iron & steel rods costs are not included in the work contract given to contractor. Company will capitalize that iron & steel costs in the building. If gross up is required then will it be applied for the both the contractor & contractee while calculating the service tax liability? kindly advice.

Thanks & Regards,

bcb 

[Madhukar N Hiregange]

As long as the FOC material is not included in the value of the WC awarded there may be no need to include that value [ rods etc supplied]

under JC the value of the contract and no need to add FOC material. Refer Bayana Builders

AI Summary

Free of cost materials supplied by contractee not included in service tax gross up when excluded from contract value.
If materials supplied by the contractee are not included in the works contract value, those free of cost materials need not be added to the contract value for computing service tax, and this approach applies for both contractor and contractee; reliance was placed on Bayana Builders.