O & M Contract

[N Balachandran]

Dear sir

Could you pl tell me the service tax applicability on the O & M contract which is being exeucted for Water Supply and Sewage Board ( Govt dept ).  Will it attact the Service tax under Work contract Service?

Since the Work Contract service rendered for Water Supply Board is exempted from payment of Service tax, Will the exemption benefit is also available for O & M contract?  Pl clairfy

Regards

 N.balachandran

[Rajagopalan Ranganathan]

Sir,

     Please see Sl. No. 25 (a) of Notification No. 25/2012-ST dated 20.06.2012 as amended.  Against this Sl. No. it is mentioned that 'services provided to Government, a local authority or governmental authority  by way of carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health etc.  In my opinion Water Supply and Sewerage Board is an independent body which cannot be called Government, a local authority or governmental authority.  Hence service rendered to the said Board is liable to service tax.

AI Summary

Service tax applicability: exemption for services to government doesn't extend to independent water boards, so O&M contracts attract tax.
The adviser addresses whether an O&M contract for a Water Supply and Sewage Board falls within the exemption for services to government or local authorities; applying the exemption wording for municipal functions, the adviser concludes the Board is an independent body and not a government/local authority, and therefore services under the O&M contract are taxable.