Construction of road for use of general public

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 September 2012 Hello members,

I am working in a construction company which is engaged in constructing roads (like national highways or state highways.)As per point 13 of mega notification construction of road is exempt from service tax.

I have a question on above matter:-
As we are main contractor hence enjoying exemption from service tax as per said notification. If we sub contract labour portion of construction, will this sub contracting attract service tax? Because as per point 13 they have not mentioned service to govt. (as mentioned in point 12), so by interpretation even sub contractor will be exempt.

Please give your advise.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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20 September 2012 Construction of roads for use by general public is exempt from service tax. Construction of roads which are not for general public use e.g. construction of roads in a factory, residential
complex would be taxable.

Sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt rom service tax, is exempt from service tax(Point no. 29(h) of the said notification.

Querist : Anonymous

Querist : Anonymous (Querist)

20 September 2012 Thank you for reply sir, but we are not sub contracting on works contract basis (only labor work is sub contracted ,i.e., material provided by us).

Point 12 of said notification starts with words "Service provided to Govt...." where as no such words used in point 13. So can we say that any services used for construction of road for use of general public is exempt?

Querist : Anonymous

Querist : Anonymous (Querist)

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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20 September 2012 As per clause (1) of section 66F reference to a service by nature or description in the Act will not include reference to a service used for providing such service. Therefore, if any person is providing services, in respect of projects involving construction of roads, airports, railways,
transport terminals, bridges, tunnels, dams etc., such as architect service, consulting engineer service ., which are used by the contractor in relation to such construction, the benefit of the specified entries in the mega-exemption would not be available to such persons unless the activities carried out by the sub-contractor independently and by itself falls in the ambit of the
exemption.
It has to be appreciated that the wordings used in the exemption are ‘services by way of construction of roads etc’ and not ‘services in relation to construction of roads etc’. It is thus apparent that just because the main contractor is providing the service by way of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc., it would not automatically lead to the classification of services being provided by the sub-contractor to the contractor as an exempt service.
Ref- point no. 7.11.11 of service tax educational guide issued by CBEC dated 20th june 2012

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