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Service tax exemption

Sathish.Bhogadi (Executive) (91 Points)

14 November 2013

Dear All,

We have small clarification regarding service tax exemption.

Q : We have provide erection and commissionig to some metro rail project (i.e exempted) now my doubt is we have given to sub contract another person then we are paying some service tax amount and we are using boom lift in the site that is also by rental and we paid service tax in this scenario how to utilize that input service tax and we are not paying service tax on our service bills.

Thanks & Regards,

Sathish Bhogadi

sathish.bhogadi @ gmail.com

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11 Replies

CA Kanagaraj R (CA, CS & CWA) (86 Points)
Replied 16 November 2013

Dear Satish,

As I could understand, you are availing exemption (erection / commissioning) services pertaining to 'metro' project, vide sl.no. 14 of notif 25/2012-ST. In such a scenario, the input services other than construction services will be chargeable to service tax. Therefore, service tax on hire charges of boom lift cannot be availed as cenvat credit.

Rgds,

CA Kanagaraj

CA. Narottam Kumar Rawat (Indirect Tax Consultant) (394 Points)
Replied 17 November 2013

Erection and commissioning services fall under Works Contract Services. Incase main contract is providing exempted services and such Works contract services subcontracted to other contractor then such sub contractor is also exempt in pursuance of Entry No. 29 (h) of Mega Exemption.

However, other cenvat credit can not be availed on all input services as output services are exempt.

CA Kanagaraj R (CA, CS & CWA) (86 Points)
Replied 18 November 2013

To clarify further, even the sub-contractor providing construction services without material (i.e., other than works contract) also qualify for exemption under sl/no: 14 of mega exemption notification. Sl. no. 29(h) provides for exemption only to works contract service providers.

CA. Narottam Kumar Rawat (Indirect Tax Consultant) (394 Points)
Replied 18 November 2013

Above services of construction, erection, commissioning, or istallation must be for Works Contract.

Exemptions start as:

"14. Services by way of construction, erection, commissioning, or installation of original works pertaining to-"

Original Works is defined under Valuation Rules for valuation of "Service portion under Works Contract".

Works Contract defined as under:

(54) “works contract” means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;

In my view, Therefore, there must be a Works contract activity (material must) to get exemption under Entry No.14.

CA Kanagaraj R (CA, CS & CWA) (86 Points)
Replied 18 November 2013

Reference to 'Original works' is placed in the mega exemption notification, to categorize the nature of work as new contruction or otherwise.

It is not mandatory that one has to do works contract (with material contract) to avail the exemption under sl.no. 14. It reads as 'Original works' only, thus there will be no exemption for completion, fitting out, repair, maintenance works.

Sathish.Bhogadi (Executive) (91 Points)
Replied 18 November 2013

Thank u very much for ur valuable feedback..!

We are doing work for newly construction metro rail project, Here we are using boom lift(machinary) at site (Material transfer Purpose).This Boom lift taken by rent basis from outside agency.Boom lift owner charge the service tax on boom lift rent bill.Here Service tax exempt or not. can u clarify.

Thanks & Regards,

Sathish Babu

sathish.bhogadi @ gmail.com

CA Kanagaraj R (CA, CS & CWA) (86 Points)
Replied 18 November 2013

Service tax exemption under sl.no: 14 of the said notification is available only for construction services pertaining to metro projects.

Therefore, hire services (supply of tangible goods) will be liable for service tax and cenvat cannot be availed on the same.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 18 November 2013

Very fruitful discussion. Keeping bookmarked.

Regards,

M.Prabhakaran (Accountant) (24 Points)
Replied 30 January 2014

Sir,

One labour contractor doing labour work for residential house. Is he liable to collect service tax for residential building work. (Nature of work-marble labour contractor), payment made through his company name but doing work for individual. can he collect service tax?? please provide details

Ashish Kaul (Proprietor) (49 Points)
Replied 19 January 2016

Dear Sir,

We have provided Erection and Commissioning service to IRCON which is the turnkey project contractor for Rail Coach Factory. IRCON advised us that Service Tax is exempt since Rail Coach Factory and all workshops are also exempt under 'railways' mentioned Sl 14 of Mega Exemption Notification. However, it is not clear whether the exemption is available to us since we have billed to IRCON and not directly to Railways. What is the authority for exemption to sub-contractors in this case? We have performed the job at RCF site only.

Please advise as our Service Tax assessing authority is questioning the exemption.