Service Tax on Construction Services

[CABALRAM PANDEY]

Dear Experts,

Greetings of the Day!

I would like to submit her some situation for your kind opinion.

1. A contractor is engaged for building residential complex by a manufacturing co. These residential complexes shall be used by the staff of the company. Whether contractor charge service tax on bills raised for services provided by him to manufacturing company.

 

2.A contractor is engaged for building as hostel & institution building by a private institution giving BBA, MBA. The hostel is solely meant for students of such institution. Whether contractor charge service tax on bills raised for services provided by him to Private institution.

If your answer is no, please quote the particular section, notification and decided case laws.

 

Thanks

CA Balram

 

YES ,

CONTRACTOR CAN CHARGE S.T ON BOTH SERVICES.

 

[PAWAN KUMAR]

Yes service tax would be charged in both the cases.

[CABALRAM PANDEY]

plz mentioned the exact section & rule

 

Since construction is a service and both the examples given by you do not fall in the negative list of services hence no doubt the servcice tax is leviable in both the services. Why does it require a case law because nothing is doubtful?

Thanks

S.R. Bansal

[CABALRAM PANDEY]

I require case law bcoz, service receiver is saying he is exempted from paying service tax, and construction of residential complex have some issue where, receiver of services has given contract to make building for his personal use. Please advice me

 

Contractor ---------->Constructing building for --------> xyz Co. Ltd.--------------> building shall be Used by his employees.

Now,

Contractor raised bill -------- >Labour+Material+Service Tax on Labour portion = Gross Bill-----> to co.

Now, 

In return Co. pays only Labour + Material saying the building is for self residential purpose hence no Service Tax shall be levied..

Please advice

Thanks

CA Balram

[Krishan Gopal]

HI,

ans to first question it will be come under works contract. if contractor is a company, 100% liabiltiy of servcie tax of contractor if not 50% and rest 50% will be manufacture co.under reverse charges.

further if original work ST will be charged 40% on invoice value, if not 70% on invoice value.

K Gopal

AI Summary

Service tax on construction services: contractors should charge tax on the service component despite recipient claims of exemption.
Construction services for employee residential complexes and institutional hostels do not fall within the negative-list exclusions and are treated as taxable construction services; practitioners advise that contractors should charge service tax on the service/labour component of invoices. The discussion highlights disputes where recipients claim exemption for self-use and notes related compliance considerations: classification as works contract, potential reverse-charge implications in specific supplier-recipient relationships, and common valuation mechanics allocating labour and material portions for tax computation.