Claim of Input credit and vat liability

[Guest]

A’ is the principal Contractor who has sub-contracted the work to ‘B’, a sub-contractor. A will discharge all liabilities relating to VAT and shall give Form 409 to ‘B’ who shall be responsible for carrying out the Works Contract. The entire amount of material is to be supplied by ‘A’. Contract Value for ‘A’ : Rs. 100 Contract Value for ‘B’ : Rs. 90 Place of work : Maharashtra ‘B’ sub-lets the work order obtained from ‘A’ to ‘C’ (the company) at a total contract value of Rs. 80. As per as per our understanding, ‘C’ is not an assessable entity for VAT purposes as It is not transferring any goods under Works Contract. ‘C’ further sub-lets the entire work order to ‘D’ at a value of Rs. 70. Please elaborate the WCT/VAT/Service Tax provisions in relation to ‘C’.Is there any provision in service tax where if the principal contractor discharges his liability of service taxthen the sub contractors down the chain do not have to charge service tax ,claim input credit and then adjust their liability against the cenvat available Thanks & Regards  Regards  Ashish Verma  Addl G.M.(Taxation) s discussed the querry is being sent to you.Please clarify at the earliest. Thanks & Regards  Regards  Ashish Verma  Addl G.M.(Taxation)  Parsvnath Developers Ltd  Parsvnath Metro Tower  Shahdara  Mobile no. 9910066045

[Rama Krishana]

In vat / works contract under sales tax, there are certain decisions also regarding your query that once turnover on which sub-contractor has paid the tax, can not be included in the turnover of the contractor i.e. the same shall be excluded. But, similar situation / facility is not available within the provisions of service tax. I wish to agree that in service tax also, a service can not provided twice. Provision of service is a specific issue and can be provided by one person only. Same service can not be provided by the two or more persons. But to give effect to this problem and double taxation, the concept of Cenvat Credit is there. Now, if you wish to avail the benefit of abatement at each level, the proposition may be against you, but if you choose to pay full rate of service tax without availing abatement and avail cenvat credit, you may not feel much burden where the two or more levels of contractors involved i.e. contractor, sub-contractor, sub-sub-contractor etc.

[Guest]

Building Material was procurred from the unorganised sector and the rate was paid lumsum as is the practice in the trade that the cost to the buyers is inclusive of all the taxes and is built in the rate per cubic feet billed.the department wishes to ascertain the service tax payable on the freight element comprised in the composite rate even though the position has been clarified that the essential ingredient of being a Goods Transport agency is missing in the case of procuremant of goods and nor is there any methodology for the customer/consignee to arrive at the freight amount in the value of stone/dust/sand aggregate procurred.What is the position of the assessee in the above case.

AI Summary

VAT Exemption for Subcontractor 'C' in Multi-Tier Contracts; Service Tax on Freight in Composite Rates Questioned A principal contractor, 'A', subcontracts work to 'B', who further subcontracts to 'C', and then to 'D', with respective contract values of Rs. 100, Rs. 90, Rs. 80, and Rs. 70. 'C' is not considered assessable for VAT as it does not transfer goods. The discussion highlights that turnover taxed at the subcontractor level cannot be included in the contractor's turnover for VAT, but similar provisions do not exist for service tax. The concept of Cenvat Credit is mentioned to address potential double taxation issues. Additionally, there is a query about service tax on freight in composite rates for building materials sourced from the unorganized sector.