Sh.Bhalchandra Pandya Ji,
You are providing service based on pure labour and, therefore, it makes no difference whether it is in respect of old building or new building .
You are providing service without material i.e. on pure labour basis. Your service is covered under the category of “Service Portion in the execution of a works contract” which is a declared service under -Section 66 E(h) of the Finance Act. As per point no.6.8.1 of an Education Guide dated 20.6.2012,
“ Labour Contracts do not fall in the definition of works contract. It is necessary that there should be transfer of property in goods involved in the execution of such contract which is leviable to tax as sale of goods. Pure labour contracts are therefore not works contracts and would be leviable to service tax like any other service and on full value.”
Nowthe question of valuation arises. Valuation has to be determined in terms of Rule 2 A (i) of Service Tax Determination Rules, 2006 as amended vide Notification No.24/12-ST dated 6.6.12. These Rules are subject to Section 67 of Finance Act. And amended definition of ‘consideration’-Explanation (a) to Section 67 (effective from 14.5.2015) is also very relevant in this context. Since pure labour is involved, ST has to be paid on gross amount charged. The elements of gross amount charged are mentioned in Rule 2 A (i) in itself which are extracted below:-
(b) value of works contract service shall include, -
(i) labour charges for execution of the works;
(ii) amount paid to a sub-contractor for labour and services;
(iii) charges for planning, designing and architect’s fees;
(iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract;
(v) cost of consumables such as water, electricity, fuel used in the execution of the works contract;
(vi) cost of establishment of the contractor relatable to supply of labour and services;
(vii) other similar expenses relatable to supply of labour and services; and
(viii) profit earned by the service provider relatable to supply of labour and services.
Note:- Pl. also read Rule 2 A(i) (a) & (c) of these Valuation Rules also.
Valuation is not to be determined under Rule 2 A(ii). Service Provider is to go for Rule 2 A (ii) if valuation cannot be determined under Rule 2 A(i) ibid.
In view of position explained above, no abatement is admissible under Notification No. 26/12-ST dated 20.6.2012 and 24/12-ST dated 6.6.12. (Both are effective from 1.7.2012) RCM is applicable.
* Accounting Codes: 00440290, 00440334, 00440245, 00441480 (Other Than Negative)
* Depending upon exact nature of service whether for civil or residential or repair etc.
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