Service Tax on Plant & Machinery

[RAJENDRA KHOMNE]

Sir,

We have completed Spot Load Fixture Installation and Electric power Analysis work (Fabrication & Labour Charges Fabrication, Pipe Reilling work from contractor. We capitalized it to Plant & Machinery. Contractor charged Service Tax as under

Bill Amount - ₹ 1,59,298/-

Service Tax 15% of 50% of 40% = 159298 X 15% = 23894.7 X 50% = 11947.35 X 40% = 4778.94

Our Query is Is it come under RCM? and balance 60% ST Is payable by us? Can we take Service Tax Credit.

Pl guide.

Thanks,

Khomne R. M.

[KASTURI SETHI]

Dear Querist,. First you are to ensure whether service qualifies the definition of Works Contract Service as defined under Service Tax. Any contract ?

[YAGAY and SUN]

Fabrication activities do fall under Works Contract Services. However, reverse charge would be applicable according to the provision of Notification 30/2012-ST if services are provided by specified service providers. If service are provided by a Ltd company or Pvt Limited Company then reverse charge would not be applicable. CENVAT credit would be available as per the provision mentioned in the CENVAT credit Rules, 2004.

[Ganeshan Kalyani]

If the work includes material with service it amounts to works contract service. If it is pure service then reverse charge will not apply. So, as mentioned by Sri Kasturi Sir you need to see the agreement/ contract. Thanks.

[KASTURI SETHI]

Dear Querist,

If you conform to the parameters as mentioned above, you need not worry about 60% balance. It is not Service Receiver's headache.

Just for information, there is a difference between 'abatement' and 'service portion'. Benefit of abatement is under Notification No.26/12-ST whereas benefit of service portion is under Notification No.24/12-ST.

There is not one parameter to conform to the definition of 'Works Contract Service'.

[DR.MARIAPPAN GOVINDARAJAN]

Shri Sethi optly told.

AI Summary

Works Contract Service classification determines reverse charge applicability and CENVAT credit availability depending on the provider.
Classification as Works Contract Service governs service tax consequences: mixed supplies of goods and labour typically amount to works contract, while pure services do not. Reverse charge applies only if the provider is a specified service provider; services by a private/public limited company are excluded from RCM under the relevant notification. CENVAT credit is available under the CENVAT Credit Rules, 2004, subject to conditions. Taxpayers must review the contract and the nature of the supply; abatement and service-portion notifications confer different benefits and must be applied distinctly.