Internet Service Provider - Service tax on Hardware and software , Service Tax

[Samir Shah]

One of my client is Internet Service Provider. It entered into turnkey projects with various government agencies. Project comprises of Supply, Installation and commissioning of Hardware, Software and other components to set up a LAN in Govt. Warranty for 1 year was also provided. Separate PO for Hardware and services have been received, invoices were also issued separately. Dept. is asking for Service tax on Hardware and software also considering the whole cont. as turnkey project though 98% of the cost is of Hardware, software and components and only 2% is services. Whether the contention of the same is right? if not any favourable notification, circular or case laws?

Posts / Replies

[S Gupta]

1 Manner of billing does not effect the nature of transaction and amount liable to service tax. 2 Technally speaking it is a matter of facts and figures. If your supply of material of hardware and value charged thereof is bonafide and independent transaction, action of the department is illigal and unwarranted.