Date: |
15-09-2009
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Notification No: |
Service Tax Circular No 116/2009 (ST)
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Issuing Authority: |
Service Tax
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Type: |
Circular
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File No: |
137/40/2009 – CX. 4 |
Subject: |
Regarding leviability of service tax on construction of canals by Government agencies
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Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)
Circular No. 116/10/2009 - ST
New Delhi, the 15th September 2009
Subject: Leviability of service tax on construction of canals by Government
agencies – reg.
On a reference being received by the Board, two following issues were examined
for a clear understanding of facts. The first is regarding leviability of
service tax on construction of canals for Government projects.
- As per section 65 (25b) of the Finance Act, 1994 “commercial or industrial
construction service” means —
(a) construction of a new building or a civil structure or a part thereof; or
(b) construction of pipeline or conduit; or
(c) completion and finishing services such as glazing, plastering, painting,
floor and wall tiling, wall covering and wall papering, wood and metal joinery
and carpentry, fencing and railing, construction of swimming pools, acoustic
applications or fittings and other similar services, in relation to building or
civil structure; or
(d) repair, alteration, renovation or restoration of, or similar services in
relation to, building or civil structure, pipeline or conduit,
which is —
(i) used, or to be used, primarily for; or
(ii) occupied, or to be occupied, primarily with; or
(iii) engaged, or to be engaged, primarily in,
commerce or industry, or work intended for commerce or industry, but does not
include such services provided in respect of roads, airports, railways,
transport terminals, bridges, tunnels and dams.
- Thus the essence of the definition is that the “commercial or industrial
construction service” is chargeable to service tax if it is used, occupied or
engaged either wholly or primarily for the furtherance of commerce or industry.
As the canal system built by the Government or under Government projects, is not
falling under commercial activity, the canal system built by the Government will
not be chargeable to service tax. However, if the canal system is built by
private agencies and is developed as a revenue generating measure, then such
construction should be charged to service tax.
- The second issue is about Government taking up construction activity of dams,
irrigation projects buildings or infrastructure construction etc. through
turnkey or EPC (Engineering Procurement & Construction) mode. The said service
is covered under section 65 (105) (zzzza) of Finance Act, 1994. The said section
itself excludes works contract in respect of dams, tunnels, canals of irrigation
projects, road, airports, railways, transport terminals & bridges executed
through such turn-key or EPC mode. Hence works contract in respect of above
works even if done through turn-key or EPC mode are exempt from payment of
service tax
Yours faithfully
(Himanshu Gupta)
Commissioner (Service Tax)
F. NO. 137/40/2009 – CX. 4
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