Quantum of duty on goods

[THYAGARAJAN KALYANASUNDARAM]

“A”, a manufacturer and a registered assessee under central excise, provides the manufactured good to “B” along with erection and commissioning of the said good. B issues a Purchase order as composite contract i.e. supply as well as erection to A for this. Now, A is not able to bifurcate the Value provided in the purchase order toward goods and services, where value of service and goods cannot be independently identified .How valuation should be done in this case to pay excise duty and service tax?

[YAGAY andSUN]

Dear THYAGARAJAN KALYANASUNDARAM

Under Rule 2A, it can be vivisected or you have to option to pay the service tax @ 14% on the 40% of the Gross Value of such agreement/Contract/MOUs under Works Contract Services.

Regards,

YAGAY and SUN

(Management, Business & Indirect Tax Consultants)

[Ganeshan Kalyani]

I agree with Yayay and sun. This is original work and therefore 40% of the value of contact is a taxable service and service tax to be paid@14%. Care should be taken whether the provider of service is individual, HUF, Firm, AOP, BOI then reverse charge will be applicable.

AI Summary

Works contract valuation: option to apportion supply and erection or treat a portion of contract value as taxable service. Where a composite supply of goods with erection and commissioning cannot be bifurcated, valuation may be determined either by vivisecting the gross contract consideration to allocate between goods and services or by applying the works-contract valuation approach that treats a prescribed portion of the gross contract value as taxable service; if the service provider is an individual, HUF, firm, or similar entity, reverse charge may apply.