erection and commissioning service

[Guest]

dear all

i require study material on erection and commissioning services

regards

Bal Kishan

[Ganeshan Kalyani]

Dear Bal Kishan, you have touched a very hot topic. The subject needs a lot of discussion. If you can write down your specific query we would try to provide you with suitable reply.

[KASTURI SETHI]

Yes, Sir.

Without specific query nobody can understand what Sh.Bal Kishan wants to know and for what specific purpose. With specific query the experts would be able to guide him in a better way which will be useful for others also.

[Guest]

Presently my company having mfg. of transmission line tower structure in Rajasthan, now it is get first contract on turnkey basis in state of UP where one contract related to supply of tower structure and another one related to erection and commissioning of line.

Now to meet my service tax obligation on erection and commissioning contract I have following doubts

1. We open a branch office at UP and taken UP sales tax reg. for purchase of local and inter state purchases and claim WCT refund which shall deduct by buyer.

2. my first query is we are doing our billing from UP address to buyer so should I get new service tax no. for UP or continue with present registration for deposit the tax amount

3. Another one when I opt abatement scheme, should I pay service tax on erection of brought out items and other material supplied by buyer

4. Another one should I take credit of service tax amount of services received from our erection contractors or amount deposited under reverse charge mech.

5. Another one what to do on service tax credit of common input services used by us where bifurcation not possible like bank charges, commission, courier service, machinery maint. etc.

6. we also require to billing of some excisable and non excisable brought out items where non excisable items covered under trading sales so should I require to reversal of service tax cenvat credit as per rule 6

I request to all that kindly update how to deal all of these issue and tell me any other check point to meet my service tax obligation

I also request to share with me any guidance note or book on this subject if anybody having knowledge.

 

[KASTURI SETHI]

Sh.Bal Kishan Ji,

1. If you have centralized billing system or centralized accounting system, you may opt for Centralised Registration Certificate under Rule 4 (2) & (3) of Service Tax Rules, 1994. If you have not Centralized billing system or centralized accounting system, you are required to apply for separate service tax registration certificate for branch office in U.P. under Rule 4(3A) of Service Tax Rules

2. If you opt for abatement, you will provide service under the category of 'Works Contract Service' (Section 65(105)(zzzza) and value will be determined under Rule 2A(ii) (A) of Service Tax (Determination of Value) Rules,2006 and you will not be eligible for Cenvat Credit. Value of material will be included.

3. If you can segregate the value of material and equipment/machinery to be installed and erection, commissioning, installation charges, then your services will be of labour charges only i.e. 'pure labour' and pure labour cannot be classified under 'Works Contract Service'. Then your services will be classified under specific category of "Erection Commissioning or Installation Services" under Section 65(105)(zzd) and Service Tax will be paid at on gross receipt of labour charges only i.e. without abatement.

4. If you pay Service Tax on full value of erection, commissioning and installation services (pure labour), you can take cenvat credit. Credit can be taken under Reverse Charge Mechanism.

5. Regarding Service Tax credit of common input services in the event of non-maintenance of separate records, you can opt for reversal of credit under Rule 6(3) of Cenvat Credit Rules, 2004. Rule 6 (3)(i) is very simple for computing the amount of reversal.

6. Value of non-excisable goods will be taken into account for computation of the amount of reversal of credit. For this purpose, non-excisable goods will be treated as under 'exempted goods'. See Explanation 1 and 2 under Rule 6(1) of Cenvat Credit Rules.

 

[Ganeshan Kalyani]

I fully agree with the views submitted by Kasturi sir.

[KASTURI SETHI]

Thanks a tonne, Sh.Ganeshan Kalyani, Sir.

AI Summary

Erection and commissioning services classification determines service tax valuation and cenvat credit eligibility. Registration depends on centralized billing/accounting: centralised registration if maintained, otherwise separate branch registration. Classification controls value and credit: abatement treats the service as works contract with material value included and no cenvat credit; segregated pure labour qualifies as erection/commissioning service taxed on labour receipts with cenvat credit available. Cenvat credit on inputs and services (including reverse charge) is permitted for taxed services, but common input services require proportionate reversal under the credit reversal rule, and non-excisable goods are treated as exempted goods for reversal computations.