Material Plus Labour related bill enquiry for service tax

[ramkishore gupta]

Respected Sir

Please help to clear my concept regarding the following matters related with service tax:

01. Bill raised where material and labour charges ( tds deducted on bill amt) are mentioned separately but i am not in a position to show my material purchase bill to the assessing officer. Will service tax be calculated on both amount or only labour amount?

02. Bill is raised only for material and even no such tds has been deducted on bill amount , can assessing officer even bring them under the preview of service tax?. In this case also i am not in position of producing purchase bill to the officer.

Waiting for your reply

Thanks Sir

[KASTURI SETHI]

In the first situation, ST will be charged on labour charges only. No abatement available. 100 % ST i.e. 15%. Also ST is leviable on TDS .Pure labour cannot fall under Works Contract Service. ST cannot be charged on both in this situation.

In the second situation, it is sale only and not service. No link with service.

It is your option. If you want abatement raise bill with material including labour. If any assessee is unable to segregate material and labour value, then he opts for abatement.

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir. Service tax is applicable on service portion in the bill and at full rate of tax without abatement.

No service tax is applicable on transaction of sale.

[ramkishore gupta]

Inorder to get the exemption for material will i have to produce my purchase bill to the assessing officer??

[Ganeshan Kalyani]

The description of the items (material) on the invoice raised by the contractor would suffice to prove the authority that it is material. However, if need be he may ask to substantial it. Thanks.

AI Summary

Service tax on labour applies when bills separate material and labour; sale-only supplies remain outside service tax. When a bill itemises material and labour but purchase invoices are unavailable, service tax applies only to the labour component at the full rate and is chargeable on amounts after TDS; pure labour is not necessarily works contract. Invoices showing only material without TDS are treated as sales not services. A supplier unable to segregate values may opt for abatement, and item descriptions on the invoice may suffice to establish materiality though officers may demand substantiation.