TaxTMI 
TaxTMI 
Dear sir,
pls. suggest service tax will be applicable or not on compensation of erection work
ST on compensation
05 Oct 2015 
8 Replies 
1616 Views Asked by
Guest 
Service tax on compensation: characterization as declared service or price reduction determines levy and taxability.
Compensation or liquidated damages for delayed erection work may prima facie fall within declared services under Section 66E(e) and attract service tax; however, a tribunal view treating such amounts as a price reduction can reduce the taxable value of the supply and negate separate taxation. If the compensation has already been taxed, it should not be taxed again. The contractual basis and factual nature of the payment determine whether it is a declared service or a value adjustment. (AI Summary)
Compensation or liquidated damages for delayed erection work may prima facie fall within declared services under Section 66E(e) and attract service tax; however, a tribunal view treating such amounts as a price reduction can reduce the taxable value of the supply and negate separate taxation. If the compensation has already been taxed, it should not be taxed again. The contractual basis and factual nature of the payment determine whether it is a declared service or a value adjustment. (AI Summary)