Larsen & Toubro Limited

Presentation on Indirect Taxes

Indirect Tax Department

29.06.2016

BASICS OF
INDIRECT TAXES

Income Tax

Taxes on
citizens

Entry Tax /
Octroi

Wealth Tax
Professional
Tax

Direct

Indirect

Service Tax
Excise Duty

Property Tax
Registration
Tax
(Stamp Act)

Sales Tax /
VAT

Goods
Service
Tax
( GST )

Custom Duty

LEVY EVENT
VAT / WCT ON
BUYING / SELLING

LEV
Y

CST ON INTER STATE

PURCHASE & SALE.
ED ON MFG. & REMOVAL
CUSTOMS ON IMPORTS
SERVICE TAX ON SERVICES

SALE
Sales Tax / VAT
Commercial
Dealings in
GOODS

Commercial
dealings in
SERVICES
5

DEEMED SALE
Works Contract Tax
MANUFACTURING
Excise Duty
IMPORTS
Customs Duty

+
PROVIDING SERVICE
- Service Tax

ELEMENTS OF SALE

-- GOODS i.e. MOVABLE

-- PARTIES-BUYER/SELLER

-- CONSIDERATION - PRICE

-- DELIVERY WITH TITLE

INVOICE

TYPES OF SALE
LOCAL SALE-Trading/WCT

S ALE

INTER STATE SALE

IMPORT / EXPORT SALE
MISC. SALES

VAT payable on Works contract is commonly known as

Works Contract Tax ( WCT)
VAT & WCT Both are same
WCT is governed by VAT Act
7

CONCEPT & SCHEME OF

VALUE ADDED TAX
( VAT ) & INPUT TAX
CREDIT ( ITC )

VAT

Value

Addition

=
T
9

Taxable Turnover

Value Added Tax (VAT)

1) It is a multipoint tax
2) Whenever Sales takes place,
VAT is payable e.g.
A sells to B B sells to C C sells D
D sells to => VAT Payable at each
stage
10

Rate of VAT / Works

Contract Tax
At present general rate of tax is
4, 5 , 13.5 and 14 % depending on the item.
But it varies from state to state

11

Input Tax Credit (ITC)

Applicable :
1) Re-sale/
a) VAT paid against purchase from RD Dealer
Sale under
and re-sale in the same state.
Works Contract b) Tax Invoice of Supplier is must.
c) VAT amount should be shown separately
along with the TIN No for claiming ITC
2) Inter State Sale : a) Available in case of goods purchase
from local RD Dealer
3) Capital Goods : a) VAT paid against purchase from RD
Dealer and accounted in RO books &
used in works contract.
12

An example :
Sl
no
Particular
Amount
1 Basic supplier price
100.00
2 VAT @ 15 %
15.00
3 Net procurement cost
100.00
4 Add profit @ 10%
10.00
Taxable Turn over/deemed sales
5 price
110.00
6 VAT/WCT @ 15%
16.50
7 ITC
15.00
8 VAT payable by L&T
1.50

9 Gross Tax element

16.50

CONCEPT & SCHEME OF

WORKS CONTRACT TAX
COMPUTATION OF
TAXABLE TURNOVER
Stock transfer vs sales
14

DISTINCTION BETWEEN
SALE

DEEMED SALE

15

46th CONSTITUTION AMENDMENT ACT

1982

Sales Vs Deemed
sales
You secure a Purchase Order for manufacture &
supply of Boiler accessories for agreed price,

-- Transaction construed as Sales

Instead secure a Work Order for manufacture,
Transportation, loading / unloading, installation,
commissioning & handing over the job for agreed
contract price.

-- Transaction construed as Deemed

Sales /Works Contract

CONTRACT FORMAT
Sl.
No.

Purchase Order

Works Order

Definition NA

Definitions - Must

Description of goods

Description of work

Price

Value

Payment terms

Payment terms

Title / Ownership goods

Title /.Ownership - rate

Rates & Taxes ST / CST / ED

Rates & Taxes WCT / ED /

Service Tax

Concessional forms Invoicing

pattern - Invoice

Concessional forms Invoicing

pattern RA Bill

Labour & Service

charges Rs.150/-

Contractees Material
(on recovery basis)
Rs.150/-

Spares &
Consumables
Rs. 50/-

CONTRACT VALUE
Rs. 1000/-

Spl. Sub-contractor
Turnover
Rs. 100/-

Profit
Rs. 100/-

Construction
Materials

Local RD Purchases
Rs. 100/-

18

Imports
Rs.100/-

Other Purchases

URD
Rs.100/-

Factory supply
Rs.100/-

Inter State
Rs.50/-

COMPUTATION OF TAXABLE
TURNOVER
Particulars
Gross Turnover

Amount in
Rs.
1000.00

Less: Spl. Sub-Contractor Turnover

100.00

Less: Labour & other service Charges

450.00

Taxable Turnover

450.00

WCT payable

35.00

Less: ITC

4.00

Less: TDS

20.00

Paid by cheque

11.00

Accounting of WCT
Construction material account 71404
ITC / VAT current account 36013
WCT paid ( project related ) account 80268
Account
code

Purchase
within state

Purchase
inter- state

TTO

71404

100 Dr

104 Dr

100+104+
=401

36013

4 Dr

nil

MRN made

104

104

Payment to
104
104
TTO = 401 + 49 ( profit ) = 450
vendor
A/c 80268 - WCT Dr. 35/A/c 36013 - ITC A/c 38067 - TDS -

Cr.
Cr.

Bank A/c (Paid by cheque) Cr.

4/20/11/-

WCT PAYMENTS
SCHEME

ACTUAL BASIS
(ascertain Gross
construction material
value, supported by
Books of Accounts &
Proof)
21

COMPOUNDING
BASIS
2% - 4% on Contract
Value, Subject to
certain conditions.

Works Contract :
Composition Scheme
a) Rate of WCT @ 2% / 4 %
b) No ITC benefit
c)Interstate purchase cannot be
made
22

d) Road Permit cannot be issued.

STOCK TRANSFER VS. SALES

Sl.
No.

Sales

Stock Transfer

1.

Supply and sale of goods.

Transfer of goods.

2.

SALE RESALES- RESALES

TRANSFER SITE DEPOT.

Delivery of goods
From Sellers to buyers
Transfer of title to purchaser
Price as agreed by parties

3.

Transfer of good with title to

buyer.

Delivery of goods
From Site to Site/ Depot.
Own goods transferred to
our own site / depot.
Transfer price market
value

Transfer of goods within the

Company.

URD Spl. Sub-Contractor implication

- on us !!
I)

ADDITIONAL FINANCIAL IMPLICATION ON LTCG.

II )

POSSIBILITY OF PROJECT DELAY

III)

EROSION OF PROFITABILITY

VI)

FINANCIAL BURDEN

V)

AVOIDABLE LITIGATION

26

ISSUE OF MATERIALS ON
CHARGEABLE BASIS

IT AMOUNTS TO SALE AND PURCHASE.

TAX
INVOICE TO BE RAISED WITH

27

APPLICABLE VAT RATE

TAX
TO BE DISCHARED TO GOVT
TREASURY
SHOULD FORM
PART OF
GROSS
TURNOVER
INPUT TAX CREDIT (ITC) AVAILABLE IN
CASE OF LOCAL PROCUREMENT FROM
REGISTERED DEALERS

SALES TAX DEDUCTED AT SOURCE (STDS)

THIS IS AN ADVANCE RECOVERY OF TAX

TAX
IS
DEDUCTED ON THOSE

28

CONTRACT WHICH INVOLVES BOTH

MATERIAL AND LABOUR
STDS IS NOT APPLICABLE ON PURE
LABOUR
JOBS
AND
MOBILISATION
ADVANCE
STDS CAN BE ADJUSTED AGAINST
ACTUAL TAX LIABILITY.
RATE OF STDS IS 2% to 4% AND VARIES
FROM STATE TO STATE.

TDS - NEED FOR CURRENT SITUATION

Collection of TDS certificate:
To be collected along with our payment receipt.
TDS certificate to be forwarded to IC/BU A/c for
accounting.
The same will be forwarded to RITs after accounting
TDS certificate can be adjusted within tax period.
(1month)
If it is not adjusted we have to wait upto completion
of assessment may take 4 to 5 years.
Thus blockage of working capital.
Double taxation.

CONCEPT & SCHEME OF

CENTRAL SALES TAX
( CST )
6(2)b sales
FORM C & OTHERS
30

INTER STATE SALES - CONCEPT

Movement of goods
from one State to another
in pursuance of contract of sale
Prescribed Declaration - CST Act

31

TO

FORM - A

FORM - I

INTER-STATE SALE
DIRECT INTER-STATE

SALE
INTER-STATE

SALE BY
TRANSFER OF
DOCUMENTS OF TITLE
TO GOODS

32

CST APPLICABLE
RATE
2% for sale to registered dealer against CForm.

33

VAT Rate of origin State will be applicable

on sale to unregistered dealers / without C
Form.

TRANSIT SALES U/S 6(2)(b) OF CST

ACT
Jamshedpur,

Maharashtra

Jharkhand

Movement of
goods
Supplier
( ABB )

Pu
r
Or chase
der

Form - C
Form E1

34

Contractor
( L&T )

se
a
h
c
r r
u
P rde
O

Client ( TSL )

Form - C

CONDITIONS & DOCUMENTATION FOR

SALE IN TRANSIT E1 SALES
FOR CLAIMING FULL EXEMPTION
1) Specific goods with pre-fixed price
2) C Form to be issued by Client
3) E-I Form to be issued by Vendor
4) Endorsement on Consignment Note is must
5) Material should be billed immediately on
delivery of goods
6) Sales in Transit / Second Sale No Tax liability
7) Supply invoicing on client to be completed
within a month.
35

CONDITIONS & DOCUMENTATION

CONTD.
8) Client billing to have parity with suppliers invoice,
both in terms of description and quantity.
9) Despatch details should be properly updated.
10)Prompt collection of C & E-1 forms.
11) Turnover declared based on authorized supply
invoices from RITs.
12)Hence only authorized supply invoice should be
submitted.
13)No separate invoice should be submitted with
different invoice no. & date from site.
14)Imposition of additional tax, penalty & interest.
36

Supply invoice-Endorsement on LR/CN

LR / CN has to be endorsed properly to

process our supply invoices.

Mistake in LR/CN ,DC,MRN etc resulted in an
incorrect report generation in EIP and wrong
Tax calculation.
A sample endorsement on LR should be
Please deliver the goods/material bearing the
RR/LR/CN no. Dt.
DC NoDt ..
To M/s .. ( Client name ) Add..
(Signature & date)
For Larsen & Toubro Limited
ECC Division.

DESPATCH ADVICE INSTRUCTIONS

SALE IN TRANSIT
Consignment note / LR
Consignor Vendor name & address
Consignee Larsen & Toubro Limited A/c

Client and address

Vendor invoice Consignee Client name and address
Buyer Larsen & Toubro Limited and address
If there is no separate column for Consignee &

buyer, invoice can be made as Client A/c Larsen &

Toubro Limited and site address.

POINTS OF CONCERN

Whether a single sale in transit bill can be

made against supply from various vendors .

No, separate resale invoice to be raised for separate vendor.

Whether PO can be placed for various

materials supplied by a single vendor in case

of Sale in transit which to be assembled at
site.
No, PO to be placed against the final product only in case of

trading sale/ sale in transit.

Whether endorsement of CN/LR can be done

after receipt of material at our site/store.

No, endorsement should be done before delivery of material

to client or receipt at our store.

Whether material procured under courier

service can be invoiced under sale in transit.

No, only public carrier is applicable.

Import Sale :
Movement of goods from other Country to

India
Bill of Lading
Bill of Entry
High Sea Sale agreement between L&T &

Client
Road Permit of Client

C
1. Applicability Form

a) Re-sale
b) Manufacture / processing of goods for Sale
c) Use in Mining
d) Generation / distribution of power
e) Packing of goods for sale / resale
f) Use in Telecommunication

2. For non-billable items / Excess Supply

C Form can not be issued
41

C FORM NOT APPLICABLE

SL NO

42

CONDITIONS

PURCHASE OF SPARES

PURCHASE OF P&M

PURCHASE OF CAPITAL GOODS

FOR OWN CONSUMPTION

POINTS TO PONDER
Consumption - issue
Issue type

Issue to works - billable items

Issue to sub-contractor on
recovery basis
VAT to be paid
To select the tag properly
Client Recovery

VAT Invoice to be collected

POINTS TO PONDER

Purchase Order Points to be Noted

Site Purchase Order Proper updation of VAT
tag and C Form.
GIN / MRN
TIN to be updated properly.
Dispatch details.

Selection of Tax Type while Placing Purchase

Order
Tax
Sl.
Type No.
P.O
1

When to Use / Features

Example

GST
Purchase of goods from UnWITHOUT

registered Dealer.
FORM
For interstate purchase of goods Purchases of
CST
used for own consumption
Consumables ,Spares,
WITHOUT
The vendor should charge full rate of Safety items, Tools &
FORM
Tackles etc.
CST without C Form for the item.
Purchase of Goods within the State
and used for own consumptions
Input Tax Credit ( ITC ) is not
eligible for these type of goods.
Suppliers should charge VAT but Purchases of
VAT-ITC the same is not eligible for ITC Consumables ,Spares,
NOT Credit since material procured Safety items, Tools &
ELIGIBLE under this category are used for Tackles ,Plant &
Machineries.
own consumption purpose.
Proper care & attention should be
given in comparison with VAT Tag
(Sl. No. 5 herein under) while
selecting this tag.

Selection of Tax Type while Placing Purchase

Order
Tax
Sl.
Type No.
P.O

When to Use / Features

Example

Inter state purchase of goods which

Cement, Paints, Iron &
are billable / re-saleable under
CST WITH
Steel, Electrical Items
Erection contract.
FORM C
etc.
under
Erection
Contract.
WCT to be paid by us.
Purchased of goods within the State
which are billable / re-saleable under
Supply/ Erection or any Contract..
The vendor should charge VAT in the
invoice.

46

Any
material/
Goods
VAT-ITC WCT / VAT should be paid by us &
those are billable / reELIGIBLE input tax credit is eligible for
sale to Client.
such purchases.
Proper care & attention should be
given in comparison with GST NON
VATABLE TAG (Sl. No. 3 herein
above) while selecting this tag.

Selection of Tax Type while Placing Purchase

Order
Tax
Sl.
Type No.
R.O P.O

When to Use / Features

Example

Inter State purchase of client

material those are billable / re-sale to
client under supply contract
6

Any material/ Goods /

CST WITH
Equipment those are
FORM C The
vendor
should
charge billable / re-sale to
& E-I concessional rate ( cst @ 2% ) of
Client.
tax for the item against C Form
The vendor must give E-I form to
us.

7
47

EXPORT
Goods purchased for Sale during Not Applicable for jobs
WITH
course of export
in India.
FORM H

SYSTEN ADHERANCE
ENTRY PERMIT / WAY
BILL

48

Entry Permit/ Way BillSignificanceIt is a statutory document

Requires to bring any material into / sending

out side the state.

To safe guard revenue of state.
To stop misutilisation / malpractice.
Ascertain dealers correct tax liability.

49

Entry permit / Way billPoints of concern Only for movement of our own material not for any sub-

contractors.

All columns should be filled by sending site.

Description of material should be specific ( not like Construction

material / Construction aid).

Value of material should be mentioned in DC and permit itself

No NIL value to be given.

Receiving site should collect the duplicate copy of permit from

transporter and return for utilisation.

Should be used within validity period.

Utilisation of permit should be submitted periodically.
Non submission of utilisation statement will lead to stoppage of

new permit , imposition of penalty , interest as well as hamper

our business activity including L&T office.

CONCEPT &
SCHEME OF
CENTRAL EXCISE &
CENVAT

What is "Central Excise

Duty ?

Component

Indirect Taxes

of

Duty is levied by

Central Government

CENTRAL
EXCISE

Basic condition for imposing the Excise Duty

Manufacturing activity

(Cement

mortar)

Emergence of a new commodity

Goods shall be movable
Goods shall be marketable
Goods manufactured or

produced in India

Its description conforms an

entry in the CET Act 1985.

MADE IN INDIA

Central
Excise

MANUFACTURING
- INCLUDES !

54

MANUFACTURING
PRODUCTION
FABRICATION
CONVERSION
REPAIRING
PROCESSING

CENTRAL EXCISE
Site Activities
Fabrication of structurals
Fabrication of others

(Pipes, Ducts,
Chutes,CableTrays, Vessels,
Tanks etc.)
55

Erection / Commissioning

Fabrication at site - no excise duty

Goods exclusively meant for use for the same
project are only exempted thru specific
notification issued by Dept. e.g.

Steel structures CH 73.08

Girders
Truss
Purlin
Beams

Items of cement, sand, stone- Precast CH

68.04
Slabs
Trench covers
all pre-cast items
But entire site activity are not exempted.

Fabrication at site which attracts

excise duty
Pipes
For water supply project -Specific
exemption
(with conditions) by
notification
For Hydro projects penstock ED
applicable

Tanks
Storage tank (water) movable ED
57

applicable.
Oil tank piece by piece fixed in ground
*****

Site & Extended site

Site includes :

58

ED EXEMPTION BENEFIT
SUB-CONTRACTOR

Manufacturer having turnover not

exceeding Rs.1.50 Crs. in the
previous financial year.
59

RMC vs SMC
Excise Duty Implication for Ready Mix
Concrete (RMC) &Site Mix Concrete(SMC)
RMC was exempted from levy of duty
But in budget 2011-12 , the same is taxable @1% w.e.f. from

01.03.12 (presently @2%).

Cenvat credit is not applicable
However SMC mixed and produced at site and used exclusively
for the said project is continued to be exempted from Excise
Duty.
This year the exemption is extended to RMC also by way of the
notification no. 12/2016 dt.01.03.16 as below:
Concrete Mix or Ready-mix Concrete (RMC), manufactured at the site
of construction for use in construction work at such site.

60

Explanation. For the purpose of this entry, the expression site

means any premises made available for the manufacture of goods by
way of a specific mention in the contract or agreement for such
construction work, provided that the goods manufactured at such
premises are solely used in the said construction work only.

In short, RMC & SMC if manufactured at site are exempted from

Scenario
Situation

Plant installed within Site

Premises exclusively for a Site.
Client Land Away from Site
Land on Lease by L&T for RMC
Plant
Plant installed by Manufacturer
and provides RMC exclusively
for a Site.
Situation as above but on Land

Excise
RMC Plant
Duty
Location Applicabil
ity

Site
NO
Premises
Customer
s
NO
Premises
Own
YES
Premises
Site
Premises
Away

NO

ScenarioContd
Situation

Excise
RMC Plant
Duty
Location Applicabil
ity

Materially issued jointly by L&T

and SMC manufacturer,
Site
NO
however batching Plant installed Premises
by SMC manufacturer
Customer
s
Situation same as above
Premises- NO
awayfinalization of any
However it is requested to consult us before
order relating to RMC/SMC on case tofrom
case site
basis.

CONCEPT & SCHEME

OF SERVICE TAX
- PARADIGM SHIFT

63

Union Budget 2012-13 proposed

various important changes relating
to service tax which comes into
effect from 1st July 2012.
There is a paradigm shift in administration of
service tax from 1st July 2012. Following are the
recent changes vis--vis previous provisions
under Service tax -

Provisi
Old
on
Definiti Hitherto 120 category
on of
of services had been
service identified as taxable
service e.g.
-Commercial/industrial
construction service
Erection
&
commissioning service
Works
contract
service

New

Service means any

activity carried out by a
person for another for
consideration but does not
include a mere transfer of
- title of goods by way of
gift, trading/supply of any
goods,
money/actionable
claim,
service
by
an
employee to the employer

Important changes Particular

Declared Services
Negative list of services

Mega exemption
notification
Definition of Works
Contract
Reverse Charge
Mechanism
Abatement scheme

Nature
Specific
transactions
declared as service
Excluded
17
broad
category of transactions
from service
Exempted
34
broad
category of services from
paying of service tax
Defined separately
Making liable for both
service
provider
&
receiver in some cases
Abatement provided for

Declared Services This is also declared as service apart from the

definition given under Service. Works

Contract service falls under this Declared
service category.
Department has specified 8 broad category of
transactions which is also declared as service.
Among
them
transactions
related
to
construction industry are
Renting of immovable property.
Construction of complex, building, civil
structure or a part thereof intended for sale
to a buyer.

Negative list of services It is a summary of transactions which have

been excluded from the service tax net.

The negative list consist of 17 broad category
of services which are not applicable for
service tax among them services related to
construction industry are
Trading of goods.
Any process amounting to manufacture or
production of goods
Services by way of renting of residential
dwelling for use as residence.
Etc

Mega exemption notification

Service tax department under notification dtd 20th June

2012 has granted exemption for 34 broad category of

services from paying of service tax. This include a
number of construction services which are exempted
(on fulfillment of certain conditions) for specific use e.g.

Services provided to Government for construction,

erection, Commissioning, installation, completion or
repair, maintenance, renovation or alteration of a Civil structure predominantly for use other than
commerce/industry
A structure meant predominantly for use as an
educational, a clinical or an art or cultural
establishment
Canal, dam or other irrigation works

Mega exemption .cont.

Services

provided by way of construction,

erection, commissioning, installation, completion,
fitting out, repair, maintenance, renovation or
alteration of
A road, bridge, tunnel, or terminal for road
transportation for use by general public.
A pollution control or effluent treatment plant,
except located as a part of a factory.

Services

by way of construction , erection,

commissioning or installation of original works
pertaining to
An airport, port or railways including monorail
or metro.

Mega exemption .cont.

Services

of a sub contractor providing

services by way of works contract to
another
contractor
providing
works
contract services which are exempt.

 Means a contract wherein transfer of property in

goods involved in the execution of such contract is

leviable to tax as sale of goods (VAT/CST ) and
such contract is for the purpose of carrying out
construction,
erection,
commissioning,
installation, completion, fitting out, repair,
maintenance, renovation, alteration of any
movable or immovable property or a part thereof
in relation to such property.
In short any works contract should involve both
labour and material (L+M).i.e material on which
VAT/WCT is payable.In other words if any contrct
involves consumables,that should not be termed as
Works Contract.
In other words sub contractors who are doing
concreting or erection & commissioning etc with their

Valuation under Works contract

service As per new set of sections service tax under

Works Contract service may be paid as per

following methods
Actual method : only on gross value of
services rendered
Taxable service amount = Gross value of
contract ( taxable turnover under VAT + VAT
or sales tax paid thereon ).
Abatement method :
Original works 40% of the Total amount
charged
Maintenance or repair - 70% of the Total
Amount charged

A few Concept s
Free issue of goods & services

In case of abatement scheme, value of free

issue of goods and services will be determined
as the fair market value of all goods &
services.
Original work means

- all new constructions

- All types of additions and alterations
- erection, commissioning or installation of
plant & machinery or equipment or structure
whether prefabricated or otherwise.

Works Contract - various options

Particulars

Abatement Total amount

Actual charged
metho Original
Repair/m Others d
works
aint/Resto 70%
40%
ration
Servic
70%
e
alone

Material value 800

800
800
800
Labour & like
200
200
200
200
charges
Total Work
1000
1000
1000
1000
Order Value
Free
300
300
300
300
Inissue
case of reverse
charge
mechanism
service
Taxable
service
200
520
910
tax will
be shared
by
service provider
&910
value
( 1300*40 ( 1300*70 ( 1300*70

Abatement scheme for a few

specified services
A new abatement scheme available for 12

category of services which includes the

following
Transport of goods by rail taxable -30%
Renting of hotels, inns, guest house meant
for lodging purpose taxable - 60%
Services of goods transport agency
taxable -30%
Renting of motor vehicle taxable -40%
Construction of complex, building taxable
-30%

Reverse Charge Mechanism Generally service tax to be paid by service

provider only.
But in this method liability of payment of
service tax has been shifted partially or
completely to the service receiver also
It has to be applied based on two factors Nature of service -( 10 services ) &
Status of service provider - ( Individual
/ firm / partnership )

Reverse Charge Mechanism Nature of service

Service
provider

% of service tax
payable by
service
provider- sub
Cont.

% of service
tax payable
by service
receiver- L&T

Goods Transport
Agency

GTA

NIL

100%

Renting or hiring of
motor vehicle
designed to carry
passengers abated
value

Individual/fir NIL
m/partner
etc

100%

Same as above - non

abated value.

Individual/fir 50%
m/partner
etc

50%

Supply of manpower

Individual/fir NIL
m/partner
etc

100%

Works contract
service
( L+M)

Individual/fir 50%
m/partner
etc

50%

Rent a cab service

Method
Bill Agencys
mechanism

of
val liability
dischar ue
ge by
agency
Abateme 100 NIL
nt
0
method

under reverse charge

L&Ts
liability

60
( 400*15% )
( taxable value
is 40% on
1000=400 )

Remarks

Agency
should not
take any
CENVAT
credit of
goods &
services.
Actual or 100 75(1000*15% 75
Agency can
non
0
*50%)
(1000*15%*50 avail CENVAT
abateme
%)
credit of
nt
goods &
Conclusion We are not eligible to avail CENVAT credit
method
services.
of service tax paid for Rent a cab services. Hence from

Reverse Charge Mechanism Works

contract service sub contractor invoice
Cenvat Invoice
Work done value
- 130
Material value
- 30
Service value
- 100
Total service tax liability
- 15
Service tax claimed ( 50% of 15 ) - 7.5
Gross amount payable by L&T
- 137.5
However we are eligible to get CENVAT

credit for sub contractors portion as well

as our liability on making payment of

Unregistered subcontractor
In case of unregistered sub contractors

who are working with labour and own

material ( i.e. L+M ) i.e. providing works
contract service, the service tax liability
has now been shifted to L&T as per
Reverse Charge mechanism and 50% of
the service tax to be born by L&T.
In such case a separate details and
register to be maintained at site and
details to be forwarded to KKRO for
discharging such liabilities & take CENVAT
credit on making payment.

Creation of Work Order

determination of service tax
check list
Whether s/c services under negative list tax not

applicable
Whether s/c services under exemption category
tax not applicable
Whether service falls under Declared Services
e.g. Works contract, catering service, hiring of
equipment etc tax applicable
Whether falls under any other transaction as
service tax applicable
Once we identify the taxable service, then to
decide the schemeAbatement scheme Taxable services for which

Availability & Restriction on CENVAT

credit In case of L&T

We are eligible to get CENVAT credit almost

all the services except following services
If it relates to a motor vehicle for the following

servicesGeneral insurance service, rent a cab

operator, repair & reconditioning of motor
vehicles and supply of tangible goods.
If it relates to employees for
Outdoor

catering,
health
services,
membership of a club, health & fitness centre,
life insurance, health insurance & travel
benefits.

Points of concern
Whether sub contractor is exempted, if main

contractors service is exempted from

service tax payment.
Yes. But restricted to works contract service only.
If the main contractor providing works contract
service which are exempted from service tax, the
sub contractor providing the same works
contract service is also exempted.
Whether any transportation of material
within site comes under GTA service.
Yes. Any person who provides service in relation
to transport of goods by road and issue
consignment note by whatever name called.
Whether fabrication / precast manufacturing
comes under Service tax net.

Points of concern
Whether any abatement is available for

outdoor catering service provider.

Yes. In case the outdoor caterer provides food or

any drinks, then service tax is applicable on 60% of

the total amount.
Whether WCT/VAT has any relation with

Service tax.
Yes. Service tax valuation depends on the Taxable

Turnover under VAT and tax thereon, hence WCT

data is necessary for calculating service tax
liability.
What are the details required for taking

CENVAT.
In case of reverse charge mechanism sub

contractor CENVAT invoice and proof of our

Points to note
Whether sub contractor is exempted, if main

contractors service is exempted from

service tax payment.

But restricted Sl
asno
per
No 14 Mega
Sl noYes.
12-Mega
13following
Mega
Sl
exemption

Exemption

Exemption

Services provided to
Govtetc by way of
construction, erection..of
structure for use as
educational, clinical,
cultural establishment
etc.

Services by way of
construction,
erection.. of road,
bridge, tunnel etc

Services by way of
construction,
erection.. of
airport, port,
railways

Works contract ,
construction, erection
service by main
contractor - exempted

Works contract ,
construction,
erection service
by main contractor
- exempted

Works contract ,
construction,
erection service
by main
contractor exempted

Effective rate of Service Tax

from 01.06.2016
Service Tax
14.00%
Swachh Bharat Cess 0.50%
Krishi Kalyan Cess
0.50%
01.06.16)
Total
15.00%

(w.e.f

Cenvat Credit is available for Service Tax &

Krishi Kalyan Cess ( i.e.14.50%), whereas
Swachh Bharat Cess is non-cenvatable.