Service tax appicable or not
This query is : Resolved
27 May 2015
my client register under section 8 in company act provide service of road devlopment in industrial devlopment 60% cost provided by govt and 40% cost collect from industries where road use so this service tax liable or not
24 July 2025
Gotcha! Your client is a company registered under Section 8 of the Companies Act (i.e., a non-profit / not-for-profit company) providing road development services where 60% funding is from the government and 40% is collected from industries using the road.
Is Service Tax applicable on such services?
Short answer:
Service Tax is generally not applicable if the service is provided by a Section 8 company and is a charitable activity or covered under government exemption, but specifics matter.
Detailed Explanation:
Section 8 Company & Service Tax:
Section 8 companies are usually set up for charitable, social, or non-commercial objectives.
Service Tax exemption can apply if the service qualifies as a charitable activity or falls under specific government notifications.
Government Grant & Service Tax:
When a government body funds a service, the service may be exempt if it is for public interest and non-commercial purpose.
In your case, 60% of funding is from the government (likely to support infrastructure development as public good).
Charging service fee from industries (40%):
The 40% charged to industries could be viewed as consideration for service.
If service is provided to commercial entities for consideration, Service Tax could be attracted on that portion.
Relevant Service Tax Exemption:
The Mega Exemption Notification No. 25/2012-ST dated 20 June 2012 exempts service by an entity registered under Section 12AA of the Income Tax Act (charitable entities) by way of charitable activities.
Section 8 company may or may not be registered under 12AA.
Also, services by government or local authority are exempt under certain conditions.
Conclusion:
If the road development service is a charitable activity, and your client is registered under 12AA, service tax exemption may apply on entire service.
But since 40% fee is collected from industries, service tax could be applicable on that portion unless exempted.
If the company is not registered under 12AA, or the activity is commercial, service tax will be applicable on the value charged to industries.
What should be done?
Check if the Section 8 company is registered under Section 12AA of Income Tax Act.
Review if the service qualifies as charitable activity under Service Tax rules.
If yes, the entire service could be exempt.
Otherwise, service tax is likely applicable on the 40% charged to industries.
If you want, I can help draft a formal opinion or suggest steps to confirm exemption eligibility.
Is Service Tax applicable on such services?
Short answer:
Service Tax is generally not applicable if the service is provided by a Section 8 company and is a charitable activity or covered under government exemption, but specifics matter.
Detailed Explanation:
Section 8 Company & Service Tax:
Section 8 companies are usually set up for charitable, social, or non-commercial objectives.
Service Tax exemption can apply if the service qualifies as a charitable activity or falls under specific government notifications.
Government Grant & Service Tax:
When a government body funds a service, the service may be exempt if it is for public interest and non-commercial purpose.
In your case, 60% of funding is from the government (likely to support infrastructure development as public good).
Charging service fee from industries (40%):
The 40% charged to industries could be viewed as consideration for service.
If service is provided to commercial entities for consideration, Service Tax could be attracted on that portion.
Relevant Service Tax Exemption:
The Mega Exemption Notification No. 25/2012-ST dated 20 June 2012 exempts service by an entity registered under Section 12AA of the Income Tax Act (charitable entities) by way of charitable activities.
Section 8 company may or may not be registered under 12AA.
Also, services by government or local authority are exempt under certain conditions.
Conclusion:
If the road development service is a charitable activity, and your client is registered under 12AA, service tax exemption may apply on entire service.
But since 40% fee is collected from industries, service tax could be applicable on that portion unless exempted.
If the company is not registered under 12AA, or the activity is commercial, service tax will be applicable on the value charged to industries.
What should be done?
Check if the Section 8 company is registered under Section 12AA of Income Tax Act.
Review if the service qualifies as charitable activity under Service Tax rules.
If yes, the entire service could be exempt.
Otherwise, service tax is likely applicable on the 40% charged to industries.
If you want, I can help draft a formal opinion or suggest steps to confirm exemption eligibility.
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