Abatement on New construction/Repair work

[SHIVKUMAR SHARMA]

Dear Experts

Pls.help me in the following issue :

1.How much abatement will be available for  New Civil construction of factory building on our own land.

2.How much abatement available on Repair/renovation of  our Plant building under the head Works contract  service.

Pls.quote service tax notification Number for above refrence

​Thanks.

[Guest]

Sir, 

1) For Original Works you can avail 60 percent abatement. Service tax shall be paid on balance 40 percent i.e. 4.944 percent (40 percent of 12.36 percent ). Service Tax Category :- Works Contract Service. 

2) For Repairs & Maintainence, you shall avail abatement of 30 percent incase providing maintainene  service alongwith material and pay tax on balance 70 percent i.e 8.652 percent (70 percent of 12.36 percent)

3) Reverse charge mechanism shall apply if Service provider is Individual, HUF, AOP or Partnership firm and receiver is Body Corporate. i.e. 50 percent each provider & receiver. 

4) For Pure MMRS, service tax shall be charged at full rate i.e. 12.36 percent where there is no element of material involved. 

Kindly refer, Rule 2A - Service Tax (Determination of Value) Rules, 2006.

Thanks. 

[Ganeshan Kalyani]

I would like to discuss on the arrangement between the service provider and the receiver of the service under works contract. the material portion in execution of works contract is provided by the service receiver and work would be executed using the labour and supervision to get complete the works contract service. Since the Invoice raised by the provider of the service would consist of only service portion as the material cost is borne by the service receipt. would this arrangement be termed as works contract and service tax would be paid under reverse charge mechanism. the wording on the Invoice raised is not obvious justifying the service portion charged.

AI Summary

Abatement on works contract service reduces taxable value for new construction and repairs; reverse charge applies in certain provider-receiver arrangements. Abatement for works contract services adjusts the taxable value: original works (new construction) receive a larger abatement, repair/renovation services receive a smaller abatement when materials are involved, and pure labour/supervision services are taxed at full value. Reverse charge applies where providers are individuals/HUFs/AOPs/partnerships and the receiver is a body corporate; apply the Determination of Value rules to classify the service and compute the taxable base.