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

AI Summary

Dispute Over Service Tax Classification: Original Works Contract or Not? Rule 2A Interpretation Under Scrutiny A query was raised regarding the classification of a service contract for tax purposes. A hotel contracted a vendor for constructing wooden doors and windows, and the vendor charged service tax with a 60% abatement, treating it as an 'Original Works Contract' under Rule 2A of the Service Tax Rules, 2006. However, a service tax officer during an audit classified it as 'Other than Original Works Contract,' allowing only a 30% abatement, leading to a higher tax liability. Respondents advised examining the Finance Act's definition of Works Contract Service and suggested legal action to challenge the officer's interpretation.