Levy of service tax on sub contracted canal works

277 views 7 replies

I have one doubt about the levy of service tax on sub-contract works towards constructing branch canal/dam works around 11 km.

Let's briefly narrate hereunder for the pattern of works :

Sardar Sarovar Narmada Nigam Limited (Government Undertaking company) allotted said works to "A" who is the main contractor amounting to Rs. 750.00 lakhs (which is exempt from service tax as such works are government works), and, some portion of said works extent to Rs. 500.00 lakhs had sub-contracted to "B" who is the sub-contractor from the main contractor with executed necessary work order, wherein the liability of service tax mentioned as aforesaid works are failing under negative list and exempted from the service tax as per notification No. 25/2012, dated. 20/06/2012 . 

Now, The service tax scrutiny is ongoing and the final SCN issued by the officer alleged as you are not entitled to take any exemption benefit with said notification for aforesaid works after considering our submission of all documentary evidence and explanation as well. The main core allegation by the officer is the service tax applicable in hands of "B" sub-contractor as he provided service to a private (personal) contractor, not directly to a government company, however, the Main Contractor 'A" is entitled to get exemption of such notification as he had provided service to direct government undertaking company for aforesaid works is not for public uses such like road, airport etc. 

During the personal hearing of the such matter, the officer strictly denied the above exemption and said that the said notification does not apply to the sub-contractor even though he works canal works. 

We will make plans to reply of SCN withstand that service tax liability is exempt for us as already mentioned in the work order which issued by the Main Contractor, so is it enough or any other points require in defense to prevent such liability?

Sir, kindly guide me in this regard, your positive and speedy approach would be highly appreciated. 
 

Replies (7)

Dear Paresh Vasani,

If the principal contractor is providing an exempt works contract service [for example providing works contract service to Government vide notification no. 25/2012-ST] then in such case if some part of the works contract is sub-contracted then the sub-contractor would also be exempt from payment of service Tax.

Arun Kumar Singh sir,

Thank you for your kind and valuable information.

 

Yesterday I met with the officer in this regard, now another question/issue is raising about the constitution of Sardar Sarovar Narmada Nigam Limited (Government Undertaking Company), and also intimated me to prove the said company is fully a government company (not a government undertaking company), therefore, the service tax is to be levied on principle contractor as well as sub-contractor too. 

In a nutshell, According to the officer, The Sardar Sarovar Nigam Limited is not failing under the definition or meaning of "Government". Further, the officer said only three categories are covered under  "Government" which defined by clause 26A  in section 65B being inserted by the Finance Bill, 2015, are as follows:

1) Departments of Central Government
2) State Government and its departments
3) A Union Territory and its departments

The following category is excluded:
1) Banks/Financial constitution
2) Housing Boards
3) Central or State public sector undertaking (PSUs)
4) Autonomous bodies
5) Development Authorities
6) Institutes such as ICAI, ICSI, ICWAI etc.

Finally, Sardar Sarovar Nigam Limited's constitute failing under the above serial number 3 which is excluded from the definition of the Government, hence all transactions are taxable.

 

Kindly guide me in the above query.

Thanks

 

 

 

 



 

Dear Paresh ji,

If you will share the copy of SCN then I will examine the issue in details and prove it. Prima facie this organisation shall be covered under the exemption notification.

Respected Arun Kumar Singhji,

Here is SCN.

Please shared your contact details at arun @ rklegal.org so that I can share expert advise with you.

Hope it would just be a kind of helping purpose without any professional fees.

 

Thank you so much for your warm support.

Dear Paresh Ji,

We have few query in regards to this SCN then we will able to give you proper reply.  


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register