Service tax applicability - category - abatement claim

[sunil mehta]

A service provider gets contract for installation of pipeline for drinking water & sewage water line in a industrial township.The work will include the foll:- a)Earth excavation work for trenches & backfiliing, b)lowering ,laying of pipelines , c)filling the trenches with sand & other materials after layinf of pipelines, d)installation of air valves , socket etc at both ends and, e)hydrolic testing of finished pipeline etc. The pipeline itself will be supplied by the company.But cost of misc. materials like sand ,kapchi etc will be borne by the service provider. Query:-1)Under which category stax will be chargeable? ----(I)Errection,installation &commissioning ? ----(II)Works Contract? 2)Whether abatement of 33% can be claimed under (I) & (ii) above ? 3)Whether stax will be payable @ 67% on invoice amt. of service provider (including value of pipeline supplied by company) or invoice amount excluding value of pipeline?This is ,I think required as per Valuation of services rules,2006. or Whether stax has to be paid @67% on invoice value only?

[Markesh Antony]

Though the detailed analysis of contract may lead to different conclusion, I am of the primarily view that the service described in the query is falling within the purview of "Works Contract" category. For this purpose, you have two options either to avail composition scheme of 4% servie tax on whole value of the contact including the value of free supply of material or to pay service tax at full rate after deducting value of material from the total value of contract. The benefit of exemption of 67% is not available in this case.

AI Summary

Service for pipeline installation in industrial township likely classified as 'Works Contract'; options for 4% composition scheme or full-rate tax. A service provider inquired about the applicable service tax category for a contract involving the installation of pipelines for drinking and sewage water in an industrial township. The tasks include excavation, pipeline laying, and testing, with materials like sand provided by the service provider. The query sought clarification on whether the service falls under 'Erection, Installation & Commissioning' or 'Works Contract' and the applicability of a 33% abatement. The response indicated the service likely falls under 'Works Contract,' with options for a 4% composition scheme or full-rate service tax without the 67% exemption.