Service Tax on Grass Cutting / Vegetatin Clearance Services

[Guest]

We are a central govt organisation with about 1000 acres of govt land. We are outsourcing services of hiring of labour for grass cutting / vegetation clearance services. We will give the contract to authroised manpower supply vendor registered with labour commission, service tax, EPF & ESI through tendering only. The contract amount will be 20 - 40 lakhs per annum for clearing vegetation from this govt land. Does this service come under service tax ambit or NOT?? Kindly mention any service tax rule or GoI letter or any authority as it is required for making the contract. Thanks for this kind of valuable services

[Arun Kumar Singh]

This services are exempt from service tax vide notification no. 25/2012-ST sub clause 12 of this notification. The services provided to the Government, a local authority or a governmental authority by way ofconstruction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of (e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal.

[hardik thacker]

Sir,

Whether "Central Government "and "Central Government organisation" have same meaning for Service Tax purpose?

In my view activity as explained in question may termed as "Agriculture Produce" and hence fall under the ambit of "Negative List".

So, Service Tax is not applicable on above activity.

[KASTURI SETHI]

There is a world of difference between the term, 'Central Government' and 'Central Govt. Organization'. Central Govt. Organization may not be fully Govt. Concern. So the question arises whether the organisation conforms to the definition of term,"Government'. The definition of 'Government' in Service Tax has been amended w.e.f. 14.5.2015. What appears to me CGO referred by Sh.BS Raja Shekhar is not fully Govt. If it is not fully Govt., the question of exemption meant for Govt. under Notification No.25/12-ST (as amended) is not available to them (CGO).

Secondly, Service being received by the CGO is Manpower Supply Agency and this service does not fall under Negative list or under any list of exempted services. This falls under Reverse Charge Mechanism. Hence 100% liability is upon Service Receiver and no exemption is available to this service under Notification No.25/12-ST as amended. If CGO is fully Govt. body, the whole liability would be upon the contractor. What kind of duty is performed by the manpower supplied by the Agency or contractor is secondary matter ? Primary question is whether service falls under the Manpower Supply or not.It depends upon the terms and conditions of the agreement executed between the CGO and the Contractor. So both agreement and definition should read together between the lines. Further I am of the opinion that grass cutting and vegetation clearance both are different and both do not fall under 'Agriculture' for the purpose of Service Tax. In order to arrive at correct decision, we will have to peruse the agreement executed between Contractor and CGO and also the status of CGO.

[KASTURI SETHI]

In continuation of my reply dated 17.9.2015, I further clarify and add as under:-

(1) Pure labour cannot be classified under Works Contract Service.

(2) Whether the service is classified under,"Manpower Supply Agency" or not, it, inter alia, depends upon under whose control and supervision is the work force supplied by Contractor ?

Mr.BS Raja Shekhar is to read the latest definition word for word vis-a-vis agreement. Pl. note that revenue loss can be caused by way of wrong classification i.e. wrongful abatement and adopting RCM wrongfully.

[Ganeshan Kalyani]

I agree with Kasturi sir. The financial impact is crucial to be taken care of while referring law.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Thank you, Sir.

AI Summary

Service tax classification: recipient status and manpower supply vs pure labour determine tax liability under reverse charge. Whether service tax applies to outsourced grass cutting and vegetation clearance depends on service classification and recipient status: if the recipient qualifies as Government certain exemptions may apply, but the cited exemptions for water and sewerage works do not directly cover vegetation clearance. Classification as manpower supply or pure labour (distinct from works contract) depends on control and contractual terms; if manpower supply is found and subject to reverse charge, the service receiver may be liable. Contract terms and the organisation's governmental status are determinative.