Payment of service tax

[CASUNIL BHANSALI]

Fact: A limited company engaged in providing Tower Installation Services by using certain materials which are ultimately transfer to the contractee. As the installation service includes the transfer of property in goods, the company is charging VAT @ 12.5% on 80% of the Gross Amount Charged (Including Material) according to the provisions of DVAT. As per DVAT provisions 20% abatement will be available in case of composit work contract. Further, the company is charging Service Tax after availing 67% Abatement under Nofn.1/2006-ST i.e. service tax is charged on 33% of the Gross Amount Charged. By following the above procedure, company is paying tax (both VAT and Service Tax) on 113% of the gross amount charged. Query: Can the company pay Service Tax on balance 20% of the Gross Amount Charged by following the Notification No.13/2003-CE or Rule 2-A of the Service Tax (Determination of Value) Rules 2006, rather than paying service tax on 33% of the gross amount charged.

AI Summary

Tower Installation Firm Clarified to Pay 4% Service Tax on Composite Value Under Notification No. 12/2003 A limited company providing Tower Installation Services is charging VAT on 80% of the gross amount and service tax on 33% after a 67% abatement. The query seeks clarification on whether the company can pay service tax on the remaining 20% using Notification No. 13/2003-CE or Rule 2-A of the Service Tax Rules. Responses suggest that the company falls under the 'works contract' category and can pay service tax on 20% as per Notification No. 12/2003. It is advised to either pay a 4% service tax on the composite value or calculate service value per Rule 2A, considering the exclusion of material costs.