Regarding entry no. 12 in mega notification of service tax

Notifications 1124 views 6 replies

Dear Experts,

As per entry number 12 of the notification no. 25/2012 dated 20/06/2012. i.e the mega exemption notification,

"Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b)....

(c).... and so on.

My question is that what is the exact intent and meaning of the words "a civil structure or any other original works meant predominantly for use OTHER THAN for commerce, industry, or any other business or profession;" ?? let us consider an example : Mr. X is a Contractor who provides errection and commissioning services to Paschim Gujarat Vij Company Limited(PGVCL), which is a 100% state government company. Will the service tax be applicable in this case ???

As per my interpretation, PGVCL is indulging in commercial activity because users get bill from the company for the usage of electricity. Hence it is a commercial/industrial activity. I need views of experts and friends here.

Please do comment. 

Regards,

Karan.

Replies (6)
Yes it would be commercial activity

Hi Karan,

First of all you will have to determine whether the PGVCL is a governmental authority, as mere 100% government undertaking would not be sufficient; it shall also be set up under an Act.

Secondly, the explanation is not sufficient to determine the exact nature of activity. Generally services provided by such companies are not in commercial nature. But still it will depend upon the interpretation.

You may consider the above, and take according action.

Dear Vikas sir,

PGVCL is governmental authority. I have confirmed about it.

 

Now reagarding activities of the contractor :

they provide service for errecting of cement Polls for the company.

they dig the earth and do leveling and then errect cements polls for their contractee.

 

Please opine now.

You may note the following observations -

1.The first question is whether it is a civil structure - There is no such definition provided anywhere for this term. Hence, it may mean a structure for use by civilians. I hope the cement poll would be a civil structure.

2.It is still not provided that for what purpose these cement polls be used - I believe it would be utilised for a non-commercial activity.[pls confirm]

3.PGVCL- as you already said, it is a governmental authority, hence, the same shall be exempted from ST.

I hope the above is sufficient.

Dear Kiran Ji,

In my view, the important factor in deciding the taxability in this case is the predominant nature of the construction, repairs etc. of the building or work in progress and the ultimate use of that building/structure.  Suppose, PGVCL is a governmental authority, as u have confirmed, and it is also engaged in commercial activity, still if the building/structure is being or will be used as say hospital or say information centre, then the contractor would be exempted. Otherwise, if the building/structure would be used for commercial purposes, then tax is payable.

 

There is an OIA that PGVCL is not a Government Authority & also Erection Commissioning service is not works contract service so benefit of abatement shall not be available. (R V MOVALIYA CONSTRUCTION CO v/s Commissioner Appeals Rajkot).

Please let me know if there is any other view or judgement. 


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