We are the manufacturing of engineering products and this product is heavy machinery type, so we can manufacturing of engineering product, Quality test with assembly and after that dismantles product and send to party site. Our manpower will be errected this Machinery after reach at site ( this errection charge will be paid by party and we can pay service tax on this ) .
Now question is that before 1st July 2012 we can register with “Erection and Commissioning “Services and paid service tax and charge bill to party for this( This procedure continue last 10Years ). We have required for registration of these services due to material send to party location and we have erecting machinery for final use. This all procedure continue up to 30-06-2012 but from 1st July onward we have to face some problem from party like party says that u cannot charge refection and commissioning bill against this services because from 1st July 2012 there is two services introduced “Negative services “& Non Negative services list and as per your product u cannot charge service tax under “Errection and commissioning “Services u can charge service tax under “Works contract “Services.
We can so many efforts for convince to party but party says that u can raise bill against works contract services and as per reverse charge mechanism u can pay 50% and party can pay 50% service tax .
Now our problem is that if we cannot registered with works contract services and we are only registered with Errection and commissioning services , is there any mandatory provision against service tax rules from 1st July 2012 onward for and errection and commissioning related services u can pay service tax under works contract service rules ? If yes then please provide as per Service tax provision notification and amendment .
Your Expert advice will be required in this issue sir .
Advance Thanks and Regards,
Posts / Replies
Your customer's contention is correct that effective from 1st July,12, the service whoch involves material and labour for erection contracts will be subject to joint laibility of 50% by the service provider and 50% by the service receiver. From 1st July onwards, there is no category specific services and all services are brought under the common head - " All taxable services-other than negative list"
You can amend your Service Tax Registration with the above and bill the party with Works Contract Service by charging 50% of applicable Service Tax
You have not mentioned whether it is a composite contract or there are separate contracts for supply of m/c and erection. In case of latter, you may follow the previous procedure since it wouldnot be a works contract, but would be a non-negative taxable service w.e.f. 1.7.2012. However, if it is a composite contract, it becomes a works contract which has undergone certain changes from 1.7.2012. Even if so, the question of partial reverse charge i.e. 50:50 payment comes up only when the condition in clause IA(v) of NOfn.30/2012-ST dt.20.6.2012 is satisfied, which readsas follows:
(v) provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers to any person who is not in the similar line of business or supply of manpower for any purpose 2[or security services] or service portion in execution of works contract by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory"
Thus, if you are an individual, HUF or partnership firm and ur customer is a business entity regd as a body corporate, only then the contention of ur customer is correct. Otherwise, as service provider you would be liable to pay 100% of the service tax on the value arrived in terms of Rule 2A of the Service Tax (Determination of Value) Rules, 2006. In any case, you may need to amend your RC un
I do agree with the view expressed by Mr Vijay. Infact even after enactment of Negative list there is no change in the provision under which one service (construction service or erection & commissioning service) can be classified into works contract service if the condition under which such service can be classified in to works contract service is satisfied and the agreement is a composit agreement, then only the said service can be classified under WCS other wise not, Further as Mr Vijay said above condition in clause IA(v) of Notification 30/2012-ST dt.20.6.2012 also needs to be satisfied.
Mr. Vijay has submitted a beautiful answer to the above query.