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Road Construction for Private Real Estate

Jayesh (Service) (26 Points)

29 July 2008

Dear Sirs.

Please let me know, if any Firm Purely Engaged in Business of ROAD CONSTRUCTION under a Private Real Estate Colony Development and the Firm is also having SERVICE TAX NO.. What Law Applicable in that Case for Return, Assessment and Service Tax .

Jayesh

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5 Replies

CA PRAMOD SARAOGI (Chartered Accountant) (1113 Points)
Replied 30 July 2008

Comstruction of Road is an exempted Service whether it is a Construction of Public or Private Roads by any PERSON

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Jayesh (Service) (26 Points)
Replied 30 July 2008

Thanx sir,

Please confirm whether it is ncessary to submit Service Tax Return or Not, in that case.

Jayesh

CA PRAMOD SARAOGI (Chartered Accountant) (1113 Points)
Replied 30 July 2008

Services rendered for construction of commercial or industrial buildings are taxable. However, Construction of roads is not liable to service tax. A point has been raised that if a commercial complex is constructed which also contains roads whether the value of construction of roads would be liable to service tax.

If the contract for construction is a single contract and the construction of road is not recognized as a separate activity as per the contract , then the service tax would be leviable on the gross amount charged including the value of road construction. When services provided under a contract consists of a number of different elements , a view has to be taken on the basis of the facts and circumstances of each case to whether the service provider has made a single overall supply or a supply of different services which are to be treated differently.

When roads and bridges are undertaken by particular persons for private use, the statute does not specify any restrictions as to the use of such facilities and hence whether put to public or private use , all work contract pertaining to such activities shall be out of the scope of the levy of Service Tax.

CA PRAMOD SARAOGI (Chartered Accountant) (1113 Points)
Replied 30 July 2008

It is true that CBE&C has issued Circular MF(DR) No. B1/6/2005-TRU, dated 27-7-2005, indicating that the scope of maintenance and repair service has been widened w.e.f. 16.06.2005, in which service relating to maintenance or management of immovable properties is taxable. Consequent upon this modification, maintenance of roads, bridges, dams, railway buildings & electrical installations, etc., have been covered under the purview of service tax. However, the view is not binding on assessee or adjudicating authorities. Repair of roads has been specifically excluded from the definition of ‘commercial or industrial construction service’ - see section 65(25b). Thus, intention of, the Legislature is to exclude this service from tax net. In Dr. Lal Path Lab (P.) Ltd. v. CCE (2006) 5 STT 171 (CESTAT), it was held that if a service has been specifically excluded from definition of one service, it cannot be covered under another taxable service.

CA PRAMOD SARAOGI (Chartered Accountant) (1113 Points)
Replied 30 July 2008

The definition of 'taxable service' in relation to 'Works Contract Services' specifically excludes works contracts in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. The definition does not distinguish between public roads (government funded) and private roads (private funded) and hence it can argued that even the Private roads constructed by the Private parties should be excluded from the purview of taxability under Works Contract.