Works contract

[N Balachandran]

Sir,

Kindly clarify if the  order is placed by the customer for supply, erection   and civil works  with seperate order for each activity,  The supply of Equipment will be effected by the Manufacturing unit which is located out side Tamil Nadu  to customer under CST Sale.   The Civil works is executed in Tamil Nadu by the company having the registered office in Tamil nadu and discharge the Service tax tax liability under Composition Scheme (40% of Civil Works Value ). The Erection works also executed by the company in Tamil Nadu and discharged the service tax liability @ 12.36%.     Is it correct method for discharging the service tax liability?.   

Is there any possibility by the dept to club the supply order value  also to arrive the service tax liability as we are discharging the service tax liability under composition scheme for Civil works  alone.

I shall be thankful if you could clarify the same.

Regards

N.Balachandran

[BipadBhanjan dixit]

Composition scheme for service tax is adopted for works contract, even if the materials used for works contract are sold by you to the customer which is correct if the Rule 2A is not adopted.

In case of errection works, materials used for that work are no more owned by you after it is effected thru cst sale, If the work order is made separately for errection work and the materials used for errection work are owned by customer  and the nature if service you provide is only suppy of skilled labours for errection, then it would certainly not come under the composition scheme. So you are right to charge @12.36% if it is on service portion.

BB DIXIT,

+91-9431133227

AI Summary

Composition scheme applicability to works contracts clarified; separate CST supply and erection services taxed as distinct service components. Composition scheme applies to works contracts including where materials are sold unless Rule 2A is adopted; where equipment is sold under CST and materials for erection vest in the customer, separate erection service supplying skilled labour is not part of the works contract and may be taxed as a service, so the CST sale value need not be clubbed with the service component and civil works may be charged under composition while erection services are taxed under the appropriate service rate.