Whether Service tax applicable on recovery of capital expenditure??

[Jhanvi Jansari]

Hello sir/ma'am,
Earlier, a scheme on Critical Infrastructure Development Project was implemented by Gujarat Government on PPP mode. In this scheme, fund was contributed by 60% State Govt. 20% by GIDC and remaining 20% by industry/people. (PPP mode)

Now, for the 20% portion contributed by GIDC, GIDC wants to recover it from industries. It is charging Rs.5 per sq. mtr. space occupied by each industry.
In this Rs.5/-; Rs.3/- is amount of recovery and Rs.2/- is charged towards maintenace charges. GIDC provides bill inclusive of Rs. 3/- towards recovery and charges service tax on total Rs. 5/- inclusive of Rs.3/-. Is service tax leviable on recovery of rs.3/-? if not, please provide any judgement justifying the same.

Thanking you in advance. :):)

AI Summary

Service tax on recovery of capital expenditure is treated as consideration for maintenance services and thus taxable.
If ownership of infrastructure remains with the authority and it charges a composite fee for upkeep and cost recovery, the entire fee is consideration for a maintenance service; merely labelling part as recovery of capital expenditure does not exclude that part from service tax liability. If ownership is transferred after repayment, the transaction may assume a hire purchase character attracting service tax applicable to such transfers.