Applicability of service tax for construction services

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Mayur (Querist)
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30 July 2010 If a contractor has taken a contract from undertaking govt for construction of hospital and on contract agreement there is no mention of any charitable purpose. so is service tax applicable on R.A Bill. And if Not then on what basis we should not add service tax.

VINOD ARORA

VINOD ARORA (Expert)
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02 August 2010 There is no specific exemption from service tax in the case of hospital projects of goverment undertakings.
Therefore service tax shall be applicable in normal course. However, to reduce impact of service tax for client, you may follow clause on work contract services whereby 4.12% of the contract value shall be paid as service tax after adjusting input tax credit in due course(effective rate may be about 1-2%). In case input cerdit amount is negligible, then abatement option may be exercised whereby effective rate of s.tax may be about 3.1%.

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