Liability of service tax on services executed

[Chalapathy Rao Marthy]

Dear Sir, My client is engaged in the business of Galvaniging articles of iron and steel and is liable for Works contract tax as per AP VAT Tax. Whether he wiil be liable for service tax on services involved in execution of works contact if yes then please clarify : a. Valuation of service b. due date for registration c. from when liablity commences.

[Surender Gupta]

There would be no service tax on the activity described in the query if the principal (who is supplying the material) is paying excise duty. On the contrary, you may be liable to service tax and may avail the exemption upto Rs. 8 lacs for 2007-08(Rs. 4 lacs for 2006-07) and require to obtain registration as soon as you achieve the turnover of Rs. 7 lacs (Rs. 3 lacs)

[Madhukar N Hiregange]

The possibility of claiming that ST is not applicable to composite works contract exists at least upto Fin Act 2007. The valuation if choosing to pay and not claiming Not 8/2005 ( jw for excise paying unit) could be on the net amount after deducting the materials transferred as per VAT. If you have paid VAT on 70% then ST is payable only on 30% under Not.12/2003. This category is under Busienss Auxiliary servcie liable from 16.6.2005.

wanted Party Address & Tin No.

AI Summary

Service tax liability on works contracts hinges on supplier-paid excise and valuation rules determining taxable service value.
Service tax liability on galvanizing works depends on whether the principal supplies materials and pays excise duty; if so, service tax is not attracted. Otherwise the contractor may be liable as a Business Auxiliary Service. Valuation can be on the net amount after deducting materials transferred per VAT treatment; where VAT is treated as paid on a portion of the value, service tax may apply only to the remainder under the relevant notification. Registration and exemption thresholds determine when registration and exemption relief must be applied.