Inclusion of value of material supplied to the contractor in value of taxable service

[felix ka]

whether value of material supplied to the contractor during a construction contract is to be included in the value of taxable service?

[Gopalarathnam Muralidharan]

Value of free supply of materials are to be included in the value of taxable services

[Rama Krishana]

There are various options available if your product is falling within the category of Works Contract (i) to avail the benefit of composition scheme, (ii) to opt for regular valuation scheme. If u opt for composition scheme you need to pay 4% on the total value of contract including the value / cost of the material used into such project. In case u opt for regular valuation method, you can exclude the value of material and goods supplied / used in execution of such contract. Therefore, option is with you which method to be followed.

[THIRUGNANAM KALIYAPERUMAL]

yes, there is a department notification for that also.

[felix ka]

Thanks for the responses. The issue pertains to a period prior to 2007.

AI Summary

Inclusion of material value in taxable service: composition scheme treats supplied materials as taxable while regular valuation may exclude them. Whether materials supplied to a contractor are included in the taxable service depends on the valuation option: the composition scheme treats the total contract value, including materials supplied, as taxable, whereas the regular valuation method permits exclusion of the value of materials and goods used in executing the contract.