Service Tax on Civil Construction

[Samik Chaudhuri]

Sir

If our Factory Building is constructed by us then we are liable to pay Service Tax or not.

Please inform me at earliest.

With thanks and regards

Samik Chaudhuri.

[Rajagopalan Ranganathan]

Sir,

The service provider who constructs the factory building will charge service tax for rendering works contract service/construction service. Therefore you have to service tax. ButRule 2 (l) of Cenvat Credit Rules, 2004 defines "input Services". But this definition excludes "service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66 E of the Finance Act (hereinafter referred as specified services) in so far as they are used for -

(a) construction or execution of works contract of a building or a civil structure or a part thereof; or

(b) laying of foundation or making of structures for support of capital goods."

Therefore you cannot avail the service tax paid by you for works contract service/construction service as input service credit.

[Mahir S]

Yes sir, such input service credit is not admissible.

[YAGAY andSUN]

Dear Samik,

As we understand from your query that you have constructed factory building on you own by not deploying any contractor for providing you the taxable service. If this is not scenario then there is no requirement to pay the service tax. As service to self is not service.

Regards

Sameer Malhotra - Consultant

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

AI Summary

Service tax on construction: taxable when rendered by a contractor, and service tax credit not available for works contract inputs. Construction executed by a contractor constitutes a taxable construction/works contract service and attracts service tax, whereas self construction by the owner (without engaging a contractor) is not treated as a taxable service. Under Rule 2(l) of the Cenvat Credit Rules, 2004 the service portion of works contract and specified construction services used for constructing a building or laying foundations for capital goods is excluded from input service; hence service tax paid on such works cannot be claimed as input/Cenvat credit.