Service Tax applicable on Errection or Commission of plant

[Vivek anandhan]

Dear Experts

We are the service provider of errection or commission of plant/machinerry. It is composit service involved electrical items as well as manpower. We are not availing input credit for items used for errection or commission.

Above service providing through contractor. 100% of work done through contractor. Contractor billing on us separtly for service and material. We are raising service invoice on our Customer with small margin. Whether we have to calculate service tax on entire value(composit value) or any abatment available for exclude material cost.

Kindly clarify

[KASTURI SETHI]

SH.VIVEK ANANDHAN JI,

From your query ((100% through Contractor and manner of raising invoice), it appears that manpower is under the supervision and control of Contractor. So as per definition of 'Manpower Recruitment or Supply Agency Services' manpower has not been supplied. The whole liability of discharging ST is on contractor. NO RCM. No abatement in respect of this service.

Secondly, If your service is provided with material, then it would fall under the category of 'Works Contract Service' and you will be entitled for abatement of 60% from the gross receipt under Notification No.24/12-ST dated 6.6.12 effective from 1.7.12. (Rule 2 A of Service Tax (Determination of Value Rules), 2006. Pure labour cannot be classified under WCS.

 

 

[KASTURI SETHI]

If service is provided without material, it would fall under the erstwhile category of, "Erection, Commissioning or Installation Services" and no abatement is admissible.

[Ganeshan Kalyani]

Sir I agree with the views of Sri Kasturi sir.

[Vivek anandhan]

Sir,

Thank you for your clarification

It is clear that we can collect ST on 40% of contract value as per the notification 24/12-ST dt.06.06.2012.

Requested you to confirm that this is effectiv notification, since this notification is not reflected in the effective notification list in TMI.

[KASTURI SETHI]

Sh.Vivek Anandhan Ji,

Notification No.24/12-ST dated :- 6.6.12 is in force.Rate of abatement for original works has been same since it inception. Highlighted portion is relevant for you.

AI Summary

Abatement for works contract service reduces taxable portion when materials are supplied; pure erection services attract full service tax. Service tax treatment for erection or commissioning depends on whether materials are supplied: where materials are supplied with the service it is treated as Works Contract Service and eligible for the statutory abatement leaving a residual taxable portion; where the service is purely labour without material, it is treated as Erection, Commissioning or Installation Services and no abatement applies. Tax liability rests with the party supplying and supervising the manpower and materials, so a contractor who supplies and controls manpower bears the service tax liability and reverse charge is not attracted.