Service tax
Rema
(Querist) 10 July 2010
This query is : Open
In a composite works contract executed in the year 2006-07, the Contractor, here the service provider has given the entire labour portion to a sub-contractor. To him his Taxable Service value is equal to the sub-contract labour paid plus Gross Profit. He computed the Turnover in that manner and submitted ST return. The VAT payment was made for the whole contract by Compounding method at concessional rate of tax under the state VAT Act. During the period, the Service Tax was paid under the head "Installation errection .... " at the relevent full rate of tax. The works contract compounding method under Service Tax was not introduced during 2006-07.
With respect to the Service portion, the entire labour has been given to one subcontrator. That means the service portion is known.
Now Show-cause notice has been given to pay service tax on the entire turnover on 33% of the total receipt at the rate applicable to the relevant years. Was he right when he paid tax on the Service portion only and VAT payment was made on the entire turnover?
One important point here is, in the Show cause notice hearins stage he could produce the Material transfer Invoices and service charge invoices for the contracts .If so, is he eligible for exemption on the material transfer value on the basis of Exemption circular under Service Tax?
Rema
