Levy of service tax
This query is : Resolved
19 November 2011
A company is intending to "Construct additional rooms, toilets, modifications etc." at Govt.school.under CSR(Corporate social responsibility)initiative.
(a) whether Service tax is applicable on the construction of above building which is not intended for commercial use?
(b)If at all service tax is applicable, whether company shall be able to avail Cenvat Credit of the same.
Please kindly reply as early as possible.
(a) whether Service tax is applicable on the construction of above building which is not intended for commercial use?
(b)If at all service tax is applicable, whether company shall be able to avail Cenvat Credit of the same.
Please kindly reply as early as possible.
19 November 2011
a) Service tax can't be levied under section 65(105)(zzzza) since it is not primarily for the purposes of commerce or industry.
b) Redundant in view of (a) above.
b) Redundant in view of (a) above.
Message likes :
1 times
19 November 2011
In respect of above query i would like to clarify that my company is getting construction of this building done through bidder (contractor). Whether we are liable to pay service tax to them? If yes then whether it will be cenvatable?
It is humbly requested to reply as early as possible?
It is humbly requested to reply as early as possible?
02 August 2024
The applicability of service tax to construction activities under CSR (Corporate Social Responsibility) initiatives, and the related issues of CENVAT Credit, can be complex. Here's a detailed response to your queries:
### **1. Applicability of Service Tax**
**Service Tax on Construction Services:**
- **Service Tax Regime (Pre-GST):** Under the earlier service tax regime (before the GST implementation), construction services were subject to service tax. However, this was subject to certain exemptions and conditions, particularly for services provided to government entities or non-commercial entities.
- **Government School Construction:** As per the earlier service tax provisions, if the construction was undertaken for a government school or another entity which was not a commercial entity, it might have been exempt or subject to a lower rate. However, these exemptions were typically linked to specific criteria, including whether the school was a government institution and the nature of the contract.
### **2. CENVAT Credit**
**CENVAT Credit on Construction Services:**
- **General Rule:** Under the earlier CENVAT Credit rules, service tax paid on construction services used for construction of buildings was not eligible for CENVAT credit. CENVAT credit could typically be claimed on inputs and input services used in the manufacture of goods or in the provision of taxable services. Since construction services are not used directly in the manufacture of goods or in the provision of taxable services, the credit was not permissible.
### **Specific Case Analysis**
**a. Applicability of Service Tax:**
- **Contractor's Liability:** If you are engaging a contractor to perform construction services for a government school under a CSR initiative, the contractor will likely apply service tax on their services as per the prevailing rates and regulations. Service tax might be applicable if the construction services are not exempt under any specific notification or scheme.
- **Exemption Possibility:** Check the latest notifications or exemptions under the GST regime if applicable. Under GST (effective from July 1, 2017), similar considerations would apply, but the rules and exemptions would be under GST laws.
**b. CENVAT Credit Eligibility:**
- **Pre-GST Context:** Under the service tax regime, you generally cannot claim CENVAT credit on construction services. This means that even if you are paying service tax to the contractor, you cannot typically claim credit for this tax.
- **Post-GST Context:** Under the GST regime, construction services are generally not eligible for input tax credit if they are used for construction of immovable property, except under specific circumstances. It's important to check the exact provisions under GST to determine eligibility.
### **Action Points:**
1. **Verify Exemptions:** Review the latest notifications and exemptions under both the service tax and GST regimes. Government or educational institutions might be subject to different rules.
2. **Consult Professionals:** For precise advice and compliance, consider consulting a tax professional or legal advisor who can provide guidance based on the most recent laws and any specific details of your CSR initiative.
3. **Review Contracts:** Ensure that the contracts with contractors clearly specify tax liabilities and check for any specific exemptions that may apply.
### **Summary:**
- **Service Tax Applicability:** Service tax may be applicable on construction services, but exemptions or lower rates might apply based on the nature of the entity receiving the services.
- **CENVAT Credit:** Under the service tax regime, CENVAT credit for construction services was generally not available. Under GST, similar restrictions apply.
Always ensure to verify with the latest regulations and seek professional advice to comply with tax laws and regulations.
### **1. Applicability of Service Tax**
**Service Tax on Construction Services:**
- **Service Tax Regime (Pre-GST):** Under the earlier service tax regime (before the GST implementation), construction services were subject to service tax. However, this was subject to certain exemptions and conditions, particularly for services provided to government entities or non-commercial entities.
- **Government School Construction:** As per the earlier service tax provisions, if the construction was undertaken for a government school or another entity which was not a commercial entity, it might have been exempt or subject to a lower rate. However, these exemptions were typically linked to specific criteria, including whether the school was a government institution and the nature of the contract.
### **2. CENVAT Credit**
**CENVAT Credit on Construction Services:**
- **General Rule:** Under the earlier CENVAT Credit rules, service tax paid on construction services used for construction of buildings was not eligible for CENVAT credit. CENVAT credit could typically be claimed on inputs and input services used in the manufacture of goods or in the provision of taxable services. Since construction services are not used directly in the manufacture of goods or in the provision of taxable services, the credit was not permissible.
### **Specific Case Analysis**
**a. Applicability of Service Tax:**
- **Contractor's Liability:** If you are engaging a contractor to perform construction services for a government school under a CSR initiative, the contractor will likely apply service tax on their services as per the prevailing rates and regulations. Service tax might be applicable if the construction services are not exempt under any specific notification or scheme.
- **Exemption Possibility:** Check the latest notifications or exemptions under the GST regime if applicable. Under GST (effective from July 1, 2017), similar considerations would apply, but the rules and exemptions would be under GST laws.
**b. CENVAT Credit Eligibility:**
- **Pre-GST Context:** Under the service tax regime, you generally cannot claim CENVAT credit on construction services. This means that even if you are paying service tax to the contractor, you cannot typically claim credit for this tax.
- **Post-GST Context:** Under the GST regime, construction services are generally not eligible for input tax credit if they are used for construction of immovable property, except under specific circumstances. It's important to check the exact provisions under GST to determine eligibility.
### **Action Points:**
1. **Verify Exemptions:** Review the latest notifications and exemptions under both the service tax and GST regimes. Government or educational institutions might be subject to different rules.
2. **Consult Professionals:** For precise advice and compliance, consider consulting a tax professional or legal advisor who can provide guidance based on the most recent laws and any specific details of your CSR initiative.
3. **Review Contracts:** Ensure that the contracts with contractors clearly specify tax liabilities and check for any specific exemptions that may apply.
### **Summary:**
- **Service Tax Applicability:** Service tax may be applicable on construction services, but exemptions or lower rates might apply based on the nature of the entity receiving the services.
- **CENVAT Credit:** Under the service tax regime, CENVAT credit for construction services was generally not available. Under GST, similar restrictions apply.
Always ensure to verify with the latest regulations and seek professional advice to comply with tax laws and regulations.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Gst registration in the state of maharashtra
- After retirement
- Dried Vegetable Sale from Rajasthan to MP, E-way Bill compulsory or not?
- 44AD PRESUMPTIVE RATE ON CREDIT SALES
- Input tax credit on modular office kitchen
- Stamp Duty ACT
- Regarding TDS..
- Regarding TDS liability ....
- RCM is applicable or not (labour Charges , loading and uloading charges)
- Form 26QB - Co-owners - Total Value of Consideration
- REGARDING RETIREMENT OF PARTNER
- Regarding consequences of retirement of partner in firm
- Time Limit for Availment of ITC laying in ITC Reversal Ledger
- Tally entry - Debit note
- Debit Note of GST amount
- Regarding ITC taken or not
- GSTP registered individual should apply gstin for trading business
- Liability for GST registration in case of commission agent dealing in the sale of land.
- GST Payable Entry
- Reporting Missed Sale in GSTR-3B
Trending Online Classes
-
GST LIVE Certification Course - 42nd Weekend Batch(With Govt Certificate)
Industry Expert17 May 2025
CAclubindia
