Service Tax Payable Only on Service Portion in Works Contract Where VAT Already Paid on Goods:...

The CESTAT (Customs, Excise, and Service Tax Appellate Tribunal) has ruled that service tax is payable only on the service portion in a works contract where VAT was already paid on goods. This important clarification addresses the dual taxation issue in composite contracts involving both supply of goods and provision of services. The tribunal's decision ensures that businesses are not subjected to double taxation on the same transaction. By allowing service tax only on the 'service' component, it prevents overlapping levies, providing relief to contractors and promoting a more rational approach to indirect taxation under the previous tax regime.