Service Tax – abatement for transmission towers
DDT had recently carried a Board instruction on the subject, which read as,
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. 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. 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. 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.
An expert in the field wrote to us,
In this connection I feel that the conditions mentioned against the abatement notification issued (1/2006) for erection and commissioning mentions only "goods sold" and not goods supplied as clarified in the above circular.
The wording "goods supplied" appears in the conditions mentioned against "commercial or Industrial construction service.”
I think there is vast difference between goods supplied and goods sold. For example, if the telecom service provider procures tower form one source and make some other person to lay foundation and erect the tower. How the circular is to be interpreted, as the commissioning and installation service provider has not sold any tower. In such case is he eligible to take abatement?
Board Circulars often create more problems than solutions.