Log in Register

Login to your account

Username *
Password *
Remember Me

Create an account

Fields marked with an asterisk (*) are required.
Name *
Username *
Password *
Verify password *
Email *
Verify email *
Captcha *
View more blog entries

Consult Construction

Consult Us For Construction

SC : Affirms CESTAT LB decision; Free supplies by service recipient for construction service non-taxable

Posted by on in Service Tax
  • Font size: Larger Smaller
  • Hits: 69
  • 0 Comments
  • Subscribe to this entry
  • Print
  • Report this post
  • SC concurs with CESTAT Larger Bench, rules that value of goods / material supplied or provided 'free of cost' by service recipient for use in "construction of commercial or industrial complex" services cannot be included in computation of gross amount charged by service provider;
  • Interpreting Section 67 of Finance Act prior to and post amendment w.e.f. April 18, 2006, SC observes that the word “gross” is only meant to indicate that it is total amount charged without deduction of any expenses, and the Dept. does not get any jurisdiction to go beyond the contract value to arrive at value of taxable services; Remarks, “…in terms of Section 67, unless an amount is charged by the service provider to the service recipient, it does not enter into the equation for determining the value on which service tax is payable…”;
  • Moreover, by using the words “for such service provided” in said Section, the Act has provided for a nexus between the amount charged and service provided, states SC while observing that cost of free supplies provided by service recipient to service provider is neither an amount “charged” by service provider nor can it be regarded as consideration for service rendered;
  • Observes that Explanation 3 to Section 67(1) removes any doubt by clarifying that gross amount charged for taxable service shall include amount received towards taxable service before, during or after provision of such service, implying thereby that where no amount is charged that is not to be included in respect of such materials / goods supplied by service recipient; Rejects Revenue’s argument that payment received in ‘any form’ and ‘any amount credited or debited, as the case may be...’ is to be included for the purposes of arriving at gross amount and is leviable to service tax, in terms of Explanation (c) to Section 67(4);
  • Observes, “…the definition of “gross amount charged” given in Explanation (c) to Section 67 only provides for the modes of the payment or book adjustments by which the consideration can be discharged by the service recipient to the service provider. It does not expand the meaning of the term “gross amount charged” to enable the Department to ignore the contract value or the amount actually charged by the service provider to the service recipient for the service rendered…”;
  • As regards entitlement to benefit of 67% abatement under Notification No. 15/2004-ST dated September 10, 2004 r/w Notification No. 4/2005-ST dated March 1, 2005, SC observes that service tax is to be calculated on a value which is 33% of gross amount ‘charged’ from service recipient and “Obviously, no amount is charged (and it could not be) by the service provider in respect of goods or materials which are supplied by the service recipient”;
  • Even the Explanation added vide Notification dated March 1, 2005 did not deal with any eventuality whereby value of goods and material supplied / provided by service recipient were also to be included in arriving at ‘gross amount charged’, notes SC; Referring to its decision in Larsen & Toubro Ltd, SC observes that “…service tax is to be levied in respect of ‘taxable services’ and for the purpose of arriving at 33% of the gross amount charged, unless value of some goods/materials is specifically included by the Legislature, that cannot be added…”;
  • Notes that Notifications in question have been issued u/s 93 of Finance Act, whereby exemption can only be granted in respect of those activities which the Parliament is competent to levy service tax and covered by Sections 65(105)(zzq) and 65(105)(zzzh) of Finance Act  : SC
Rate this blog entry:
0
Trackback URL for this blog entry.

Comments

  • No comments made yet. Be the first to submit a comment

Leave your comment

Guest
Guest Friday, 25 May 2018

Like us on facebook

Twitter Feed

ConsultC Session taken on RERA https://t.co/9rK66oEWK8
ConsultC At Ahmedabad Branch of Institute of Chartered Accountants of India, Speaking on Affordable Housing https://t.co/r80GUMxM4r
ConsultC Stage set for Interaction with Anti-Profiteering Authority, Join us... https://t.co/RSFeju3F3M

Address

Address:
304, Super Plaza, Sandesh Press Road, Vastrapur, Ahmedabad
Gujarat-380054
Tel:
+91 - 079 - 40032950
E-Mail:
This email address is being protected from spambots. You need JavaScript enabled to view it.
Website:
www.consultconstruction.com

markerFind on Google Maps

Who we are

We are Ahmedabad based professional consulting firm. We are providing various services to Construction, Real Estate and Project Companies in various areas like Indirect Taxation – Service Tax & Multi state VAT consultancy, ERP implementation, Site & Management audit, Designing Tender & other related contractual documents etc.