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service tax on tyre retreading

(Querist) 21 December 2009 This query is : Resolved 
we are a franchisee engaged in tyre retreading.Whether we should pay service tax?
prakash vathore (Expert) 21 December 2009
A V Vishal (Expert) 21 December 2009
One of the new services brought to tax is "service provided in relation to the execution of a works contract".

Works contracts are subject to VAT / ST by States and the works contracts under the state acts include any contract involving transfer of property in goods from the contractor to the awarder of the contract. Examples on works contract under state laws include civil works, electrical, refrigeration or air conditioning contracts or contracts relating to supply and installation of plant, machinery, rolling shutters, cranes, hoists, elevators, escalators, generators, generating sets, transformers, weighing machines, air conditioners and air coolers, deep freezers , laying of certain kinds of tiles, slabs and stones, tyre retreading, annual maintenance contracts, etc.

The letter from The Joint Secretary (TRU), Tax Research Unit, Department of Revenue, Ministry of Finance, Government of India has issued a letter F. No. B1/16/2007-TRU also states that "Contracts which are treated as works contract for the purpose of levy of VAT / sales tax shall also be treated as works contract for the purpose of levy of service tax. This is clear from the definition under section 65(105)(zzzza)."
soumitra basu (Expert) 22 December 2009
I do agree with Mr. Vishal. But would like to add that you can opt for the compound rate of tax @ 4% on Gross Bill or 10.3% Service Tax on Labour involved in the bill.

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