Applicability of Works Contract scheme

[Asked by 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%

Management, maintenance and repair service is not included within the scope of works contract service. Therefore, you can not avail the benefit of composite rate of service tax in respect of AMC contract including material. However, you can claim deduction of material supplied in respect of AMC under notification 12/2003 subject to certain conditions. Moreover, if you are paying VAT on the AMC or part of AMC, you may claim exemption upto that amount. You may refer a recent decision - as 2009 -TMI - 32871 - CESTAT, BANGALORE

AI Summary

Works contract classification: AMC maintenance services are not works contracts, so composite rate cannot be applied.
Maintenance, management and repair services under AMCs for air conditioning units are not works contract services and cannot be taxed under the composite works contract rate. Materials supplied in an AMC may be deducted under Notification 12/2003 subject to conditions, and VAT paid on the AMC can permit an exemption up to the VAT amount.