Value of free supply to be included in assessment of service tax

[ramswaroop vyas]

Dear All,

We are giving small works contract to contractor for installation of machine or repair and maintance, we provide him maximum of material required for the process apart from small like welding rod etc are used by him.

now we are paying service tax on 70% of value.

My question is ...does the value of material given by us to our services provider will be included in tax compution.

regards

ram vyas

[YAGAY andSUN]

In current scenario the law says about fair value but previously there was specifically denial on this matter by the hon'ble High Court. In our opinion there is no such requirement to pay service tax on material supplied free of cost.

[Ganeshan Kalyani]

The matter is not yet decided by Apex court. The revenue contest that free issue of material should be added to work out service tax amount based on valuation rule. Whereas assessee's contention is free issue material does not have consideration and thereby does not fulfill the provision under Finance Act and therefore not to include the value of free issue of material.

Sri Ramswaroop Ji, now it is upto you to take a stand from above discussion. Thanks.

[DR.MARIAPPAN GOVINDARAJAN]

The value of free supplied material cost is not to be included.

[Ganeshan Kalyani]

Bhayana Builders case is pending in Apex Court in the matter of free issue of material.

AI Summary

Valuation of free-supplied materials may be contested for inclusion in service tax assessment pending authoritative resolution. Whether free-supplied materials must be included in the taxable value for service tax hinges on whether such materials constitute consideration; revenue seeks addition of their value using fair-value approaches while taxpayers argue free issue lacks consideration under the Finance Act, and resolution awaits authoritative judicial determination.