Service tax on projects outsourced by govt. deptt.

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Kapil Jain

Management Account Supervisor

21 Points Posted on 05 November 2011

Respected Members,

One of the client has got the project of preparation of Smart Card Based Vehicle Registration Card from the Transport Commissioner (RTO) of a state.

The charges for this is governed by the statute and this is a statutory duty of the Transport department which is being undertaken by the Client on behalf of the department. Client has been authorised by the RTO to collect the charges directly from the vehicle owners.

Would this client be responsible to pay service tax on the charges being recovered from vehicle owners? Also would it be covered under Sovereign activity of the state/

I need your advise on the above.

Best Regards,

Kapil

Replies (2)

CA Sripal Jain

Associate Finance

693 Points Posted on 05 November 2011

YES IT WIL BE COVERED UNDER BUSINESS AUXILIARY SERVICE,AND SERVICE TAX RULES HAVE NOT EXEMPTED SUCH SOVEREIGN SERVICES...DO GET OTHERS VIEW REGARDING THIS...AS THERE IS NO CASE LAWS SUPPORTING THIS FACT

Ravishankar K

Accountant

334 Points Posted on 06 November 2011

Confusing question indeed, when i recently went to RTO and got a receipt for reregistration and payment of road tax was Rs.400 and change of address was Rs.20/- and penalty was 100/- now as far as my knowledge goes for change of address and penalty there might be stax component which might have been paid by the RTO.

For exemption from S.Tax you need a notification from the S.Tax COmmissioner, Delhi, we have a notification for exemption of one of our course which is conducted by us. So whatever income / fees we collect on that course we need not pay service tax. Usually i am not aware whether state government organisations like RTO etc do pay service tax or not, but even if they dont pay being government they are safe, but you being private entity you have to decide, usually whatever outsourcing the RTO does the client does not collect any charge from owners directly only RTO collects fees and issues receipts and internally outsources to the client.. i.e ur client.