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Service tax on a construction work exempted earlier

POONAM (MD) (25 Points)

17 July 2015

Hi All,

Its my 1st post on this forum though I have been reading it for a few months now.

My querry is - I have a construction project of an educational institute going on- the work started in April 2012. The work is still on . Now wef Apr 1, 2015 edu institutes have been removed from mega exemption , ie, service tax is leviable from 1/4/15 which was earlier exempted.

Will this project attract service tax????

we had not taken this expense into account at the time of quoting- it wd be good 5% plus of the bill- a big amount.A sudden tax during the currency of the work - isnt it unfair to the contractor while we wrk on highly competetive rates?

Kindly revert

Best Regards

Thanks in advance

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2 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 17 July 2015

as the contractor has to simply charge the tax, collect and pay to govt,

perhaps you are discussing about 12(c)i of mega exemption, in such case if the work is ongoing the institute may file an appeal to joint commissioner for relief upto certain stage, differ case to case, on merits and demerits of contruction and compliion stage, also the board affilation is a vital factor for getting heard in such appeals.

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Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 18 July 2015

It is important while contracting that diffrential tax, new taxes are expressly agreed as payable extra. In most contracts in the anxiety to get the contract this is overlooked. If contract is all includive and specifically including future taxes then the contractor would stand to loose.

However where the ongoing contracts are there, the only relief could be as under:

1. The work completed upto 31st march 2015 could be certified and no ST charged on the same. Only for the balance work it can be claimed.

2. If contract is silent on the taxes as ST was no applicable ta the time of contract, matter can be taken up for amendment of contract. ( normally not so easy) or a new contract can be isnsited on. ( again may not be practically feasable)