WORKS CONTRACT ACT

[S.C. WADHWA]

Dear Expert,

1	We have recently got constructed one new factory in Haryana.
2	Now office has to be developed with material cost to ₹ 1.50 crore.
3	We will supply the developing material duly vat tax paid directly to the developer.
4	Developer will raised us his bill approx ₹ 28 lacs plus service charge applicable at the time of completion of his work.
	QUERY
	Whether there is any liability of service tax on us regarding supplying of developing material to developer directly. In this case whether WCT applicable.
1	Please give your expert opinion whether we have any liability of service tax
	and WCT. If yes at what amount.

[Ganeshan Kalyani]

On purchase of material you pay Vat to the supplier and when the Contract does construction work he actually provides service hence he will charge service tax on his bill. the working for purchase of material and service bill of builder should be preserved to prove it to auditor.

[Vijay kumar]

WCT arises only when it is a composite contract involving men and material. Since you are supplying the material paying VAT and the service provided by the contractor is purely labour supply service, it does not attract the provisions of WCS. It falls under commercial construction service. for which there is no reverse charge and hence there is no liability on your part to pay service tax.

[Krishan Gopal]

in my opinion, there is no liability of WCT and Service tax under reverse charges, only deduct TDS liability, and you can not avail service tax input.

Gopal

AI Summary

Service tax liability: supplying materials with VAT paid does not trigger reverse charge; contractor charges service tax on services.
Supply of construction materials to an independent developer with VAT paid at purchase does not create a reverse-charge service tax liability on the supplier; the contractor provides the taxable construction service and charges service tax on his bill. Where materials are supplied separately and VAT paid, the arrangement is not a composite works contract for WCT, so WCT does not arise on the material supplier. The supplier cannot claim service tax input credit for the contractor's service. Retain VAT invoices and contractor bills to substantiate the separate supplies; comply with TDS obligations as applicable.