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Service tax on civil constructions

CA Vivek Goyal (Practising CA) (148 Points)

15 July 2014

Hello Friends,
There is a provision in Service tax that Sec-66E (Declared Service) clause b " Construction of a complex, civil structure or a part there of, including a complex or building intended for sale to buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the completion authority."

Can we make a tax planning over this clause??
Planning: A person providing services of construction of civil structure for a PSU co. which is a quite small tender in which whole payment will be made after completion of contract. Can we take completion certificate from a independant architect/ civil engineer as per PSU guidelines and get is this service out of service tax purview??

Will it be not treated as declared service? Is my explanation right??? Please comment....

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3 Replies

Vikas (CA) (1135 Points)
Replied 16 July 2014

Hi Vivek,

I am afraid, you will still be providing construction services in the nature of 'works contract services' as 'Original Works', as I presume the total amount charged would not include the cost of land used for construction.

Even if the cost of land is covered under the contract value for you, this would not be eligible for non-taxability, as you are working under a contract and not on your own.

As per my understanding, the non-taxability provision that you are referring to, would only be applicable if the builder constructs the building on the land there after enters into a sale agreement with the buyer post receipt of a completion certificate form the competent authorities.

Lastly, not any one can issue a completion certificate for construction of a building. Just below the clause referred by you, there is definition of 'competent authority' prescribed.

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CA Vivek Goyal (Practising CA) (148 Points)
Replied 16 July 2014

Dear vikas, i am talking about small vendors doing small contracts of civil construcion undr works contract where whold bill will be raised after completion. This is not a builder type contracts.can we take completion certificate here and get save our ST. What do u think??

Vikas (CA) (1135 Points)
Replied 21 July 2014

Hi Vivek,

Law does is same for small and large builders/developers. Secondly, mere invoice or agreement would not determine the taxability. Meaning, if you have received advances from your customer, the taxability is triggered. So, I believe it is difficult to state that such transactions would not be taxable.