taxability of service

[Guest]

is service to municipal corporation by way of erection of high mast light/street light taxable. pl give your valuable opinion w.r.t pre & post negative era.

[KASTURI SETHI]

Sh.Jagannath Prasad Ji,

Sir,

In my view, it was taxable prior to 1.7.12 and it is taxable even now i.e. after 1.7.12. For period prior to 1.7.12 pl. see Board's Circular No.123/5/2010-TRU dated 24.5.10. At present it is neither covered under Negative List nor under Mega Exemption Notification No.25/12-ST dated 20.6.12 as amended.

If you think otherwise, pl. let me know.

[Guest]

THANKS KASTURUJI FOR RESPONDING

As a service, I am also of the same view. But in this case since the service is to a local authority i.e municipality, my point was that can it fall under Sl No 12 of Not 25/2012 as the service relates to erection & installation of high mast electric poles which is a original work carried out under works contract for use other than commerce etc.

Pl give your valued suggestion.

[KASTURI SETHI]

Dear Sir,

If we go through the definition of 'Original Works' in notification no.24/12-ST dated 6.6.12 as amended (Explanation -.1 below 2A---C ), this activity is not covered under Entry No.12,12 A,13, 14 (a) 14 A, 14 (ca) of Mega Exemption Notification No.25/12-ST dated 20.6.12 as amended from time to time and latest amended vide Notification No.9/16-ST dated 1.3.16. When it is out of the ambit of 'Original Works', no exemption is available under this notification.

In such like situation, Contractor will pay ST on 'Pure Labour'. This service would fall under the erstwhile Erection, Commission and Installation Service and not under Works Contract Service. Rest depends upon the terms and conditions of the Contract executed between Contractor and Municipal Corporation.

[Guest]

Dear Sir,

Contract with municipal corporation is for installation of high mast light. High mast light is a new structure constructed at site. Now, under Not 24/12 “original works” also means- (iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise. Since 'structures' are covered under original works then the installation of high mast light which is nothing but a massive structure should come under 'original work'.

Since the contract is a composit one and VAT is also being paid then such work should come under 'works contract' without any hesitation.

Now, para 12 of mega exemption notif reads as under :-

"12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;"

Under the above situation, is the service of installation of high mast light to municipal corporation eligible for exemption or not.

Pl give your valuable suggestion.

[KASTURI SETHI]

Dear Sir,

High mast light is not a structure. Pole for light is installed on high way or it is installed in streets and parks. So it is out of definition of 'Original Works' as defined in Notif. No.24/12-ST.

[Ganeshan Kalyani]

Sri Kasturi Sir your detailed reply enriched our knowledge.Thanks

[Nathu Lal Jain]

please let me know, whether, service tax liability arises against the work for electrical fitting or maintenance on street light under contract of local authority after 01.07.2012.

AI Summary

Taxability of installation services: erection and installation of high mast lights for a municipal authority may attract service tax unless exempt. Taxability of erection and installation of high mast/street lights supplied to a municipal authority depends on whether the activity is characterised as Original Works or falls within the negative list or the mega exemption. If not covered by exemption, the contractor would be liable for service tax on the labour component under Erection, Commissioning and Installation services rather than Works Contract Service; if characterised as original works provided to a local authority for non commercial use, the service may be exempt.