Benefit of abatement under the category of Erection, Commissioning or Installation

[Vijay Chitte]

Sub: Service tax on works contract X received a works contract for installation of Furniture. X will provide the services including furniture, as a full of works contract. X cannot give a separate invoice for materials and installation charges, due to, he will out of the excise limit (i.e. 1 crore) and he had to pay excise duty on the materials, He will raise only works contract invoice, because, he will safe from excise duty and only service tax will be charged. Question: 1)As per above transaction, my interpretation is true? 2) Can X will get the benefit of abatement up to 67% under the category of Eraction, Commissioning or Installation charges? 3)What should be the suitable transaction as per your view?

[Madhukar N Hiregange]

The important fact would be wherther he is covered under erection. In a WCT the manufacture of movable excisable goods would be liable for CED( if over 1 cr) as well as WCT. If he fall within the catgeory then the 67% exemption would be available.

[Guest]

I doubt that by merely by issuance of an invoice, any tax liability is determined. The levy of any tax / duty is independent to the manner you are raising invoices. From the Finance Bill, 2007 you can safely interpret that work contract was not taxable at all before that.

AI Summary

Abatement eligibility depends on classification as erection, commissioning or installation, not on how invoices are issued. Entitlement to the claimed abatement turns on whether the supply and installation of furniture is correctly classified as erection, commissioning or installation; if so, the abatement would apply. Excise liability for manufacture of movable excisable goods and works contract tax depend on statutory thresholds and the nature of the supply, and are not determined by the form of invoices. Invoice issuance does not itself determine tax liability; classification under the relevant service description governs the tax and abatement outcome.