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

Works contract classification requires either composition charging on total contract value or tax after excluding material value; abatement unavailable. The installation of pipelines is treated as a works contract. The service provider may either opt for the composition scheme and pay tax on the full contract value including materials supplied free, or exclude the value of materials and pay tax on the balance; the 67% abatement is not available.