SERVICE TAX SUB CONTRACTED WORK

[GANESH KANCHAN]

DEVELOPER FIRM (OWNER OF THE LAND) EXECUTING RESIDENTIAL COMPLEX PROJECT HAS SUB CONTRACTED STRUCTURAL WORK TO REPUTED BUILDER AND SERVICE TAX (INCLUDING S T ON MATERIAL SUPPLY) + VAT  CHARGED IN RA BILLS ARE PAID.   DEVELOER FIRM CONTENDS THAT AS PER BOARD'S circular no 108/02/2009 DATED 29.01.2009 (NOT RESCINDED BY THE BORAD TILL DATE) SUB CONTRACTOR SERVICE AVAILED BY IT IS TO DEDUCTED WHILE ARRIVING FIRM'S TAX LIABILITY. IS THE CONTENTION CORRECT ? 

ON THE OTHER HAND IF 75% ABATEMENT IS AVAILED AND CENVAT CREDIT IS ALSO TAKEN ( AFTER 01.07.2012) DEVELOPER FIRM'S TAX LIABILITY IS NEGATIVE (THAT IS REFUND). IS IT CORRECT ? 

[MANDAVILLI RAMAKRISHNA]

yes. ST paid to sub contractor can be taken as input and after abatement, excess amount

was resulted, refund can be claimed.

AI Summary

Service tax credit: tax paid to subcontractor may be claimed as input, and abatement plus CENVAT can produce refundable excess. Developer may take service tax paid to a subcontractor as input/CENVAT credit and deduct subcontracted service value when computing its liability per the Board circular. If abatement is applied and CENVAT credit is availed, the accumulated input (including subcontractor tax) can exceed post-abatement tax due, producing an excess credit position that may be claimed as a refund.