Applicability of Works Contract scheme

[Guest]

Annual maintanence of Air condition units which consists of 50% labor and 50% supply of spares. Whether this can be treated as WORKS CONTRACT and can opt for composition and can collect and pay service tax @ 4%

AI Summary

Annual Maintenance Contracts for ACs Not Eligible for Works Contract Tax Rate; Material Deductions Possible Under Notification 12/2003 A query was raised regarding whether an annual maintenance contract (AMC) for air conditioning units, comprising 50% labor and 50% spare parts, qualifies as a works contract eligible for a 4% service tax composition rate. The response clarified that management, maintenance, and repair services do not fall under works contract services, thus disqualifying the AMC from the composite service tax rate. However, deductions for materials supplied can be claimed under notification 12/2003 if conditions are met. Additionally, if VAT is paid on the AMC, an exemption up to that amount may be claimed.