service tax on construction of road

[Ramesh Patel]

We have received composite contract to construct road in 2009-2010. The composite contract includes major services as road work and other ancilary services like Electrical/IT Telecommunication cable laying along road and under road, Water supply along road services, sewarage/drainage network along road, Irrigation services along road. The service tax department is demanding service tax on other anciliary services treating it as separate service under this contract. Please share related notification, circulars and case laws for exemption of total contract.

[DR.MARIAPPAN GOVINDARAJAN]

Whether you have got clarified in the above issue? If not please inform.

AI Summary

Service tax on composite contracts: whether ancillary works must be taxed separately or contract treated as a single exempt construction service. Service tax liability on a composite road-construction contract arises where primary road works are performed together with ancillary activities such as electrical and telecommunication cable laying, water supply, sewage/drainage works and irrigation installations. The revenue treats those ancillary activities as distinct taxable services, raising the question whether the entire contract qualifies as a single composite contract for construction of an immovable property and is exempt under applicable notifications and circulars.