Works Contract

[IRFAN MALIK]

Dear Sir/Madam,

Following is the query with regards to Service Tax.

We have constructed a whole new hotel. Further we had given contract to a vendor for all new construction of wooden doors/windows in newly constructed hotel.

The vendor while issuing the invoice has taken abatement of 60% & charged Service tax on balance 40% of the service value as per Rule 2A of the Service Tax (Determination of Value) Rules, 2006 by consdering the contract as 'Original Works Contract'.

However the Service Tax officer during the course of audit has considered the above works contract as 'Other then Original Works Contract'. Accordinly he said that abatement will be 30% & not 60%. He is of the opinion that original works contract covers only all new civil constructions & not ALL new constructions. Hence he has given has abatement of 30% & not 60%. due to same there is a huge Service Tax liability on the asessee along with interest. Is the service tax officer correct that only 30% abatement is available & not 60%.

kindly suggest & guide.

Thanking in anticipation.

Regards

-Irfan Malik

[KASTURI SETHI]

Where is the word, "civil' in Rule 2 A of Valuation Rules ? None can interpret law according to one' s sweet will irrespective of the person whether assessee or department's officer. You are to go by the Act and not by the rules. Examine the definition of Works Contract Service provided in the Finance Act. Definition was changed. The words, " completion and finishing " were changed. The phrase " "fitting out' was inserted. You must fight the issue legally.

[DR.MARIAPPAN GOVINDARAJAN]

I concur with the views of Sri Sethi.

AI Summary

Original works contract abatement dispute: valuation rule interpretation affects taxable service value and officer's assessment. Dispute over whether manufacture and installation of doors and windows in a newly constructed hotel qualifies as an Original Works Contract under Rule 2A, affecting abatement and service tax valuation; officer relied on a narrower interpretation invoking a non-existent limiting term, while advisers point to the rule text and an amended statutory definition (inserting 'fitting out') to support the broader classification and urge contesting the reassessment.