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

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.