-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
1/26
Taxation of CompositeContracts
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
2/26
Basics of Service Tax..
Tax on Services provided or to be provided
Selective Services taxable
Taxable Services defined ; Service not defined Principles of Classification of Service important
Tax on the Value of Taxable ServicesProvided and Charged
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
3/26
Types of Contracts Contracts
For Sale For Service
Of Service
Divisible vs. Indivisible Contracts A grocery store sells bread, butter & tomatoes
A eating house sells a sandwich
Can it be said that:
A grocery store sells a sandwich ?
A eating house sells bread, butter & tomatoes ?
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
4/26
Composite Contracts: JudicialThinking A composite contract should not be vivisected to levy a tax on a
specific component of such a contract but should be analysed asa whole State of Madras vs. Gannon Dunkerley & Co 9 STC 353 (SC)
Even in cases where the agreements provide for progressivepayments based on individual milestones
Sentinel Rolling Shutters & Engg. Co. vs. CST 4 SCC 260 (SC) Even if specific price breakup is given for individual milestones
Daelim Industrial Co. Ltd. vs. CCE 155 ELT 457 (Tri) asapproved by SC
Even if there are separate agreements CIT vs. Sundwiger Empg & Co. 262 ITR 110 (AP)
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
5/26
Composite Contracts: LegislativePerspective (VAT)
Gannon Dunkerleys case
46th Constitutional Amendment to deemcertain transactions to be sales
The deeming fiction valid only for the saidlists and not beyond that
Geo Miller & Co vs. State of MP 5 SCC 209 (SC)
BSNL vs. UOI 3 SCC 1 (SC)
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
6/26
Works Contract: Deeming Fiction Transfer of Property by means of:
Accretion
Accession
Blending
Is Works Contract:
Sale + Service (V1) OR Service (with a Deemed Sale) (V2)
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
7/26
Doubt is not a pleasant conditionbut certainty is absurd
Voltaire (1694 1778)
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
8/26
Service Tax: Legislative Perspective
Gradual Expansion of the Scope of Taxable
Services: Consulting Limb [1997-1998]
Executionary Limb [2004-2005]
Works Contracts [2007]
Whether levy of tax on works contracts is
valid without a Constitutional Amendment?
If yes, from which period is the levy valid?
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
9/26
Some Answers
Liable Mitigate doubletaxation (BSNL)
Not Liable ??2007
Liable Mitigate doubletaxation (BSNL)Not Liable ( BlueStar)2004-2005
Not LiableNot Liable1997-1998
View 2
Service
View 1
Sale + Service
Period
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
10/26
Impact of Introduction of WorksContract Services
Lends a succinct support to View 1
Judicial Principle:
Now Said, Not Said Earlier ( L&T)
Implications on Non Specified WorksContracts
Implications on CENVAT Credit for the
Service Recipient
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
11/26
Works Contracts Services Works Contracts (transfer of property
involved in the execution of works contract isleviable to tax as sale of goods)
Only Specified Works Contracts covered
Infrastructure related works contractsexcluded
An optional composition @ 2% of the grossvalue of the contract
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
12/26
Specified Works Contracts Construction of Residential Complex
Construction of Commercial Complex
Erection, Commissioning & Installation
Turnkey Projects
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
13/26
Valuation: Gross Contract Price (-) Value of transfer of
property Excludes VAT
Base Adopted for VAT purposes conclusive
Fall-out of BSNL.
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
14/26
Those who cannot remember thepast are condemned to repeat it
George Santayana (1863 1952)
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
15/26
Composition Scheme: RepeatMistakes from the Past?? What about non specified works contracts?
CENVAT Credit on Inputs Not Available
CENVAT Credit of Input Services & CapitalGoods Available
Whether to Include Free Issue Materials ?
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
16/26
Existing Contracts: Post WCServices Impact on availability of Composition Scheme
For past activities Where the amounts are billed but not realized
Where the amounts are not billed
for future activities In normal course
Where advances were received prior to the notified date
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
17/26
Existing Contracts Situations in thepast
View 1 : Not Liable
If not registered
If registered
View 2: Liable with effect from 2004-2005
If not registered
If registered
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
18/26
Industrial Construction Services
Construction of New Building or Civil Structure or
part thereof Construction of Pipeline or Conduit
Completion and Finishing Services in relation tobuilding or civil structure Glazing, Plastering, Painting, Floor and Wall Tiling, Wall
Covering and Papering, Wood and Metal Joinery andCarpentry, Fencing and Railing, construction of swimmingpools, acoustic applications or fittings and other similar
services Repair, Alteration, Renovation or Restoration of
Building, Civil Structure, pipeline or conduit
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
19/26
Industrial Construction Services(Contd.)
Building, Civil Structure or Pipeline:
Used or to be used
Occupied or to be occupied
Engaged or to be engaged
In commerce or industry
Excludes
Roads, Airports, Railways, Transport Terminals,Bridges, Tunnels & Dams
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
20/26
Construction of Complex Services
Construction
Completion & Finishing Services
Repairs, etc.
Of Residential Complex
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
21/26
Residential Complex
More than 12 residential units
Common Area
One or more common facilities
Layout Approved Not for Personal Use
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
22/26
Erection, Commissioning & InstallationServices ECI of Plant, Machinery, Equipment or Structures
Installation of Electrical Devices & Wiring Plumbing, etc. Heating & Airconditioning, etc. Insulation & Waterproofing Escalator Related
No Exemption for Specific Projects
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
23/26
Maintenance or Repairs
Management of Properties
Maintenance or Repairs of Properties
Maintenance or Repairs of Goods
Principles of Classification
No Exemption for Specific Projects
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
24/26
Composite Contracts (Past) :Conservative View Service Tax on service component
abatement available Service Tax abatement not available for
completion and finishing services
No CENVAT Credit in case of abatement Gross Contract Value to be included
Whether Free Issue Material to be added? Construction Services Erection, Commissioning and Installation Services
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
25/26
I was born not knowing and havehad only a little time to change that
here and thereRichard Feynman (1918-1988)
-
7/31/2019 13_Microsoft PowerPoint - 20071229-Servicetax-works Contract
26/26
Thank You for a patienthearing