FIM Value calculating

[Asked by Guest]

Dear Sir,

We awarded a contract to civil party,

We providing Cement, Steel, and Structural steel for construction. can i calculate Structural steel value for service tax calculation (Free issue material).

Currently we are calculating Cement & Steeel value for service tax calculation.

I am confuse, structural steel value calculate or not.

Please advice.

Thanks & Regards,

Sanjay Vasava

[KASTURI SETHI]

Valuation (Service Tax) - Free material supply by service recipient, value thereof whether includible in gross amount charged by service provider?

The Supreme Court Bench comprising Hon’ble Mr. Justice Madan B. Lokur and Hon’ble Mr. Justice R.K. Agrawal on 11-7-2016 after condoning the delay issued notice in the Civil Appeal Diary No. 16064 of 2016 filed by Commissioner of Service Tax, Ahmedabad against the CESTAT Final Order No. A/11251/2015-WZB/AHD, dated 3-9-2015 as reported in2016 (44) S.T.R. 299 (Tri. - Ahmd.) = 2015 (9) TMI 1533 - CESTAT AHMEDABAD (Corrtech International Pvt. Ltd. v. Commissioner). While issuing the notice, the Supreme Court passed the following order :

“Delay condoned.

Issue notice.

Tag with Civil Appeal Nos. 8148-8149 of 2014.”

The Appellate Tribunal in its impugned order had followed the Larger Bench’s decision in reported at 2013 (32)Bhayana Builders S.T.R. 49 (Tri.-LB) =2013 (9) TMI 294 - CESTAT NEW DELHI (LB) and held that the value of goods/materials supplied free by the service recipient for providing services was not includible in the gross amount charged by the service provider under Section 67 of the Finance Act, 1994 as same cannot be said to be monetary or non-monetary extra consideration.

[Commissioner v. Corrtech International Pvt. Ltd. - 2016 (44) S.T.R. J151 (S.C.)]

[YAGAY and SUN]

However, current provision says Fair Market Value w.e.f 2015.

[Ganeshan Kalyani]

I agree with the reply of Sri Kasturi Sir for the reason that the case law mentioned is in support of the provision of section 67 of Finance Act. Though the valuation rules requires the assesse to add free issue of material value, but Act is supreme and prevails over the Act. Hence i am also of the view that the value of free issue material supplied by the recipient of service to the provider of service to incorporate in the construction work shall not form part of consideration to work out service tax payable amount. Thanks.

[YAGAY and SUN]

This is still a disputed matter.

Dear Sir,

can i take FIM value or not?? for service tax calculation purpose.

Sanjay Vasava

[KASTURI SETHI]

Dear Querist,

If FIM is not included in the taxable value, the department will continue issuing demand SCN. The department has not accepted the judgement of the Tribunal. Since the issue is pending with the Supreme Court, the department will keep it pending till the final decision of the Apex Court.

So include FIM in taxable value and pay ST under protest so that you may be able to apply for refund claim later on, if issue is decided in favour of the assessee. By this way you would save interest and penalty.

[Ganeshan Kalyani]

Since the matter is pending the issue is open to both. The department interpretes the law in its favour and the assesse to his favour. However if the case is decided in favour of department then interest will have to be paid. Hence as advised by Sri Kasturi Sir you better pay under protest.

AI Summary

Free issue material valuation disputed; include FIM and pay under protest to preserve refund rights pending final resolution.
Whether the value of free issue material supplied by the service recipient must be included in the taxable value of construction services is disputed: tribunal precedent held such materials are not consideration and not includible under Section 67, regulatory valuation rules adopted a fair market value approach, and while litigation proceeds taxpayers are advised to include FIM in taxable value and pay under protest to avoid interest and preserve refund rights.