Service Tax – erection of transmission towers and other equipment – Board clarifies

By Vijay Kumar

A clarification was sought on the admissibility of abatement in case of erection contract.

And Board has clarified that:-

1. For availing abatement from the gross amount charged, one of the conditions stipulated is that the gross amount charged should include the value of plant, machinery equipment, structure or parts and any other material sold by the commissioning and installation agency.

2. The other condition is that the service provider should not take the credit on input, input service and capital goods. The objective of allowing abatement for calculation of service tax is to offset the value of goods supplied in case of a composite supply of goods and services and availament of abatement is optional.

3. Therefore, abatement would not be admissible in such cases where erection and commissioning service is provided under a contract/agreement that does not include the value of goods i.e., transmission tower and other accessories which are erected or commissioned under such contract/agreement.

4. In other words, service tax would be applicable on the entire amount charged for erection and commissioning service if such amount does not include the value of all goods supplied.

CBEC F.No . 137/73/07- CX.4 Dated : November 12, 2007