Regarding Service Tax on Installation charges

[GR Satishkumar]

Dear Expert's

Please give your valuable comment''s on below issue.

One of my clients engaged in Manufacturer of Modular Furnitures.It is a partnership company, company had registered under Central Excise and Service Tax also.Company comes under SSI unit.

1.Company made Excise Invoice but Excise not charged because ( previous year Turnover not crossed 4 Crore).

For Example in Invoice breakup can be given below.

Material Cost Rs 100

Freight cost Rs 10

Installation Charges ₹ 10

Excise Duty Exempted as per section SSI/08/2003/CE

VAT @ 14.5% (on ₹ 120) 17.40

Total Material Cost 137.40

We filed ER3 return Quarterly and we shown Installation charges is also Excise Turnover in ER3 Return.

Now my question is on Installation charges we have charged Service Tax or we make separate Bill for Material and Separate Bill for Installation.

Please guide me.

[KASTURI SETHI]

Dear Sir,

As you are registered with ST separately, it is better to issue separate bill for service tax charges. Thus it will be convenient for you (accounting purpose) and for the department also. You may mention Central Excise invoice no. on Service Tax invoice for correlation purpose.

[Ganeshan Kalyani]

Whether you collect installation charges separately?

[MUKUND THAKKAR]

GR Satishkumar,

it is adviseable to take two seprate purchase order from customer, one purchase order for supply and one purchase order for installation. and genrate two seprate bills for supply issue excise invoce and for installation servicetax invoice.

[KASTURI SETHI]

Yes Sir. This method will be more convenient.

[GR Satishkumar]

Dear Sir,

we treated Installation and Freight charges also cost of Material Value, and we treated Installation and Freight also Excise Turnover.

But our record purpose in invoice we have shown Freight and Installation charges separately.

In this case we charged service tax on Freight and Installation is compulsory.

Please guide me.

[KASTURI SETHI]

Segregation on the buyer's invoice is also required. What is the basis of arriving at the value of installation charges ? For future, it is better to adopt the method advised Sh.Mukund Thakkar, an expert. It is fool proof and will not attract any dispute. However, I am posting one case law in your favour/assessee's favour.

2012 (277) E.L.T. 184 (Tri. - Del.) = 2008 (10) TMI 150 - CESTAT NEW DELHIALLENGERS MEDICAL SYSTEMS LTD. Versus COMMR. OF C. EX., CHANDIGARH

[Ganeshan Kalyani]

In my view as you are not charging separately for installation and the you are also paying excise duty on entire amount , no need to show the value of installation separately. If it would have been charged separately then showing it on the face of the invoice is necessary and accordingly payment of service tax on installation amount is also required.

[KASTURI SETHI]

Dear Sh.Ganeshan Kalyani Ji,

I intend to discuss the issue with you on this platform with an intent to make concept clearer and hence enrichment of my knowledge and also for all visitors of this forum. Nobody can deny that Central Excise duty cannot be paid in lieu of Service Tax and Service Tax cannot be paid in lieu of Central Excise duty. There is difference between the rates and valuation methods. This is the legal position of any tax whether belonging to Central Govt. or State Govt. Here in this case break-up is required by law in terms of Central Excise law as well as Service Tax law.

For example :- Now suppose you go to market and purchase an air conditioner and the dealer never gives bill inclusive of installation charges and transportation charges. Both the elements of cost are charged separately by the dealer. The dealer arranges for both jobs. Cost of installation may be not more than ₹ 500/-. Naturally Service Tax will be on ₹ 500/- only. In case this amount is included in the sale price, it will be inconvenient for the assessee to prove the exact due quantum of ST. In such a situation, the assessee will have to resort to or depend on CA's Certificate which is accepted by the department with supporting docs. Thus there are two ways 1. Opt for break up 2. Cost Accountant Certificate First option is easy. Second option is complicated and will lead to unnecessary litigation Both are in letter and spirit of law. Option is assessee's whether to choose simple or complex.

In view of the above, I still prefer to the method advised by Sh.Mukund Thakkar, Sir. I am advocating practical approach which is on merits and also in the eyes of law.

Looking forward to your response. Tell me where I am in the wrong so that I amend myself and picture should be clear to the querist also.

Thanks & regards.

K.L.SETHI

[GR Satishkumar]

Dear Experts,

Thanks for valuable suggetions.

[Ganeshan Kalyani]

Sir, i had purchased LED and the dealer sent engineer (of TV company) to my home to install it. The engineer did not charged extra for his visit and also on the face of the invoice there was no bifurcation between the value of LED and its installation charges. Based on this experience and related search on the forum, i replied to this query.

In my view, there are many such purchases where the dealer does not bifurcate or indicate the cost of installation charges separately on the face of the invoice. Logically it is understood that the cost of LED would include the cost of installation as well. However, i was on the thought process that if the dealer doesnot charge or shows the installation charge separately on the face of the invoice, the entire consideration for such sale should be subject to excise duty. But if both the cost is separated on the face of invoice or such terms was agreed with the customer by the supplier then service tax would be charged on installation portion.

Therefore the dealer should check that as to how he is charging or negotiating with their customer regarding the installation, whether including the installation charges or separately charging the same.

[KASTURI SETHI]

Sh.Kalyani Ji,

I remained in-charge of this unit (M/s.Allengers) for two years as Range Officer. Coincidentally I was Superintendent (Adjudication) when this case again came up before me. Undoubtedly, they have won the case but after going through rigours of litigation. They wasted time, money and energy which was avoidable. Break-up was easy process without spending any extra amount. Break up was not impossible and impracticable.

AI Summary

Modular furniture company advised to issue separate invoices for material and installation to simplify service tax compliance. A client involved in manufacturing modular furniture seeks advice on handling service tax for installation charges. The company, a partnership registered under Central Excise and Service Tax, did not charge excise duty due to turnover below 4 crore. Experts recommend issuing separate invoices for material and installation to simplify accounting and compliance. Some suggest including installation charges in material cost, while others advise separate billing to avoid disputes. The discussion highlights the importance of clear invoicing to distinguish between excise duty and service tax obligations, emphasizing practical approaches to avoid litigation and ensure legal compliance.