Friends
I want to know applicability of service tax on government contracts for construction of :
Road Work
Government Buildings
Other buildings like, schools, hospitals and housing projects for govt.
Please help
6 Replies
CA PRAMOD SARAOGI
(Chartered Accountant)
(1113 Points)
Replied 08 May 2010
(1) Construction and Repairs of Road is specifically excluded from the perview of Service Tax. Thus construction of Road is a Non-Taxavle service. The government has clarified that construction of roads is not a taxable service, though repair, management and maintenance of roads will attract service tax. A Central Board of Excise and Customs (CBEC) circular has cleared the air on taxation of Construction, repair, maintenance and management of roads. The circular comes after CBEC, a body under finance ministry that administers indirect taxes, received several representations from the industry highlighting divergence in practices followed by service tax department officials. Service tax is levied at the rate of 10%.
Commercial or industrial construction services specifically excludes construction or repairs of roads from the ambit of service tax. But, management, maintenance or repair provided under a contract or an agreement in relation to properties, whether immovable or not, attracts service tax. There is no specific exemption under this service for maintenance or repair of roads.
“...these definitions lead to the conclusion that while construction of road is not a taxable service, management, maintenance or repair of roads are in the nature of taxable services, attracting service tax,” the circular said.
The board has also clarified which type of activities would constitute construction and maintenance or repair.
While resurfacing, renovation, re-laying, filling of potholes and strengthening would be treated as repair and maintenance service, laying of new roads, widening of narrow roads to broader roads and changing of road surface would be treated as construction of roads.
In reply to debate on finance bill 2(2009) FM has declared that no service tax is applicable on repair & maintenance of Roads.Circular is given below
EXEMPTION TO MAINTENANCE OF ROADS
NOTIFICATION NO. 24/2009 - SERVICE TAX, DATED 27-7-2009
In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service, referred to in sub-clause (zzg) of clause (105) of section 65 of the Finance Act,1994, provided to any person by any other person in relation to management, maintenance or repair of roads, from the whole of the service tax leviable thereon under section 66 of the said Finance Act.
(2) Construction of School, Government Offices , Hospitals , Housing Projects are basically non - profit making activities and are excluded from the perview of service Tax. However, if any of these activities are carried out by the Govt for making profits expressly or impliedly then it would become taxable.
Suresh Ranganathan
(partner)
(21 Points)
Replied 11 May 2010
can you please clarify if there is any service tax exemption for erection and commissioning of cold storage for state or central government departments
suresh
JAYANTA DUTTA
(Officer)
(24 Points)
Replied 10 May 2011
Can i charge service tax on any government organisation?
Madhukar N Hiregange
(Chartered Accountant)
(39034 Points)
Replied 10 May 2011
The entry specifically falls either under commercial construction or under works contract. Both provide that the construction should be for industry and commerce.
Applying the said understanding most Govt contract would not be liable to ST. Some projects like roads, dams etc have been specifically excluded in the deifntition where there is no ambiguity. In other if demand raised it may have tobe litigated.
CA GANESH KAKADE
(CHARTERED ACCOUNTANTS)
(25 Points)
Replied 05 October 2011
I want to know if the consultancy services are given to Govt. buildings are exempt from service tax, if not what is the rate to be applicable
jonesmiyh2011
(manager)
(25 Points)
Replied 05 October 2011
The entry specifically falls either under commercial construction or under works contract. Both provide that the construction should be for industry and commerce.
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