Construction of Building

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Deepak Sharma (Querist)
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15 November 2007 My Question is Concern to an Education Society

An Education Society is Constructing a Building it self for office but now it want to make construction of building by a Construction Firm
In this situation Material and Construction costs will remain same but construction firm will charge WCT and Service Tax on cost of construction to Education Society where as in case of Building Construction By Education society it self, there is no need to WCT and Service Tax
Education Society also exempt to pay service tax on Educational Services
My Question is whether any situation is exist where Service Tax or WCT charged by Construction Firm could set off or credit utilised by Education Society

Dayal

Dayal (Expert)
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19 November 2007 Actually, service tax is not payable if the building is not for commerical purposes. Hence if consutruction is for educational purpose, service tax is not payable.

However, Vat will be payablae and I don't think it can be avoided or set off.

I am keeping the query open for other learned friends to express their views.

Shyam Lal Naik

Shyam Lal Naik (Expert)
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19 November 2007 The service is not taxable under commercial or inustrial construction. Is it taxable under Works Contract?

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Dayal

Dayal (Expert)
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21 November 2007 The wording of the definition itself says that it is for 'commercial purposes'. Further, department has clarified as follows - Educational, religious, Government buildings etc. not covered - The service tax is on construction of building or structure for commerce or industry. Hence MF(DR) circular No. B2/8/2004-TRU dated 10-9-2004 clarifies as follows - ‘Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic
purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, Government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally Government constructions would not be taxable. However, if such constructions are for commercial purposes like local Government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax’.

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