Repair of Building and Service Tax

[Ashok Chopra]

Respected Forum,

I am manufacturer-exporter of ready made garment. I have done repair of building. Building material supplied by me to labour contractor. labour contractor with own and two-three workmen done the labour job. During audit, officer is of opine that this is work contract and i am liable to pay service tax under reverse charge mechanism.

Please guide me accordingly.

Thanks and regard

[Himansu Sekhar]

Sir,

In my view, the materialks given to the contractor are deemed to be the transfer of propertty of goods towards the job undertaken. The main ingredient of works contract is when fulfilled, the services can be works contract services. If you are a company liability under sec. 68(2) arises. The cenvat credit will not be available to you as prohibited under rule 2(l) of CCR .

Another school of thought categorise it as manpower service. Why I differ is due to the fact that the payments are not done on man days basis, rather on work measurement basis.

Another group is of the opinion that the entire service is construction services. Hence no liability on receiver. Even if the liability is on the contractoir, the exemption limit comes to his resume

There are thus dfivergent views. But I feel wcs is the appropriate one.

[DR.MARIAPPAN GOVINDARAJAN]

In my view also it is works contract.

[Nash Industries I Pvt Ltd]

its Works Contract and attracts partial reverse charge mechanism.

Regards

S.Ramaswamy

[KASTURI SETHI]

Dear Querist,

With due respect to all experts, I differ and express my views as under:-

Since the contractor has provided construction service (without material i.e. material supplied by you), so it is a case of pure labour and pure labour cannot be classified under the category, "Works Contract Service". 100% ST is to be paid by the contractor after collecting from you under Section 68(1) of the Finance Act,1994. If the contractor has not exceeded the threshold exemption of ₹ 10 lakhs, no service tax is payable.No RCM is applicable. No direct liability upon you.If the Contractor has crossed threshold exemption limit, he will collect ST from you and deposit into Central Govt. after getting registration.

This service cannot be classified under, "Manpower Supply & Recruitment Agency" because hired labourers remained under the supervision and control of the Contractor and not under you supposing that there is no agreement between you and the contractor which may prove 'Manpower' remained under your control.

This service falls under the category of 'Other Than Negative List' or under erstwhile "BAS".

 

[Ganeshan Kalyani]

I concur with the views of Sri Kasturi Sir, on the ground that service provider has rendered only service and had not supplied any material during construction. He has just used the material supplied by you to construct. Thus it is not works contract service. Thanks.

[Rajagopalan Ranganathan]

Sir,

I agree with the views expressed by Shri. Kasthuri Sir and Shri. Ganesan Kalyani Sir.

[YAGAY and SUN]

If the stake involved are not too high, then, just to keep the litigation away and adopting conservation view in your matter, please pay it off and relax.

AI Summary

Works contract classification determines reverse charge and service tax liability where owner supplies materials and contractor supplies labour.
Classification of repair work where the owner supplies materials to a contractor affects who bears service tax and whether cenvat credit applies. Opinions diverge: one sees a Works Contract Service triggering reverse charge on the owner and denial of cenvat credit under rule 2(l) of CCR; another treats it as contractor-provided construction or pure labour service with the contractor responsible to collect and pay tax subject to the exemption threshold. The factual question of control over labour and characterisation of material supply is decisive.