TaxTMI 
TaxTMI 
Regarding Work Contract under reverse charge mechanism.
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....egarding Work Contract under reverse charge mechanism.<br> Query (Issue) Started By: - Swapneswar muduli Dated:- 8-2-2016 Last Reply Date:- 12-2-2016 Service Tax<br>Got 7 Replies<br>Service Tax<br>Dear Sir, 1) If we purchase a machinery parts and this price is including the installation charges also. and the material provider person comes our factory and install this parts in our machine. In the....
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.... above case service tax will attract under reverse charge mechanism or not for service recipient ? 2) some service provider repairs our split AC in our office and with material in that case service tax will attract or not ? Can any one explain me the regarding Work Contact under reverse charge mechanism with example in which type of service falls under work contract and liable to pay service tax....
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.... as a service recipient Regards Swapneswar Muduli Reply By Ganeshan Kalyani: The Reply: 1) The price is inclusive of installation charges which means the contract is for both material and labour and hence it satisfies the conditions of works contract and works contract is classified under reverse charge Notification and as such service tax is liable to be paid partially by service provider and....
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.... service recipient in the proportion specified in the reverse charge notification. 2) Repair would include both material and labour component and therefore service is applicable under reverse charge. Reply By KASTURI SETHI: The Reply: Sh.Ganeshan Kalyani Ji, With due honour, I totally differ on this issue. I know this is an hypothetical query and even then it is very interesting and informativ....
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....e query. Point-wise reply to query is as under:- 1. This falls under the erstwhile category of "Management, Maintenance or Repair Services" specified under erstwhile Section 65 (105)(zzg) of the Finance Act, 1994. This is maintenance. This service is neither eligible for abatement nor Reverse Charge Mechanism. This service cannot be treated as service with material inasmuch as value of ....
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....the part to be fitted in the machine and labour charges (fitting charges) are known to the Service Provider (and dealer). Both can be bifurcated easily i.e. Sale and service. Service Tax cannot be charged on sale of any part of the machine. Here deduction is allowed in terms of erstwhile Notification No.12/2003-ST dated 20.6.2003 (Now rescinded).Though Notification stands rescinded but value of th....
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....e machine is excluded, it being sale. In other words, it is a case of 'pure labour' and hence cannot be classified under the category of "Works Contract Service".Hence not eligible for abatement and RCM. 2. This is repair service and also falls under erstwhile category of "Management, Maintenance or Repair Services" specified under erstwhile Section 65 (105)(zzg) of th....
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....e Finance Act, 1994. Remaining reply is same as at point no.1. Maintenance is continuance activity and repair is one time activity. At present both activities are covered under the category of ,"Other Than Negative List". Service Receiver will pay ST to the Service Provider and SP would deposit into the Govt. account. If any assessee classifies both type of services in "Works Cont....
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....ract Service" on the basis of service being provided with material, it will be misclassification and misuse of the benefits provided under abatement and RCM schemes. Reply By Ganeshan Kalyani: The Reply: Thanks for your reply. But with due respect I would like to share that in the definition of 'works contract service' the term 'installation' and 'repairs' are defined. Also it satisfies to a....
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.... contract which involves supply of material and service portion in the form of installation, erectioning and commissioning. It is evident that machine is purchased and it need to be installed to make it function. The question will emerge to clarify that the price of machine is added to include the service value of installation. In the regime of reverse charge mechanism the auditor raises these que....
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....stions apparently and asks for service tax on the pretext that the contract consists both material and labour portion and it satisfies the conditions of works contract service. Further regarding second query I.e. repair which is also given in the definition. However I would like to go by your views if you could support your reply with a case law. Thanks. Reply By KASTURI SETHI: The Reply: Sir, ....
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....I shall reply today. Reply By KASTURI SETHI: The Reply: Replied under Issue ID No. 109851. Reply By Ganeshan Kalyani: The Reply: Thanks Sri Kasturi Sir. Reply By KASTURI SETHI: The Reply: Sh.Ganeshan Kalyani Ji, Pl. let me know are your fully convinced or not. It is in my interest to know your views as there is always scope for improvement.<br> Discussion Forum - Knowledge Sharing ....