Painting work of single residential unit

[Siva Rama]

Dear sir,

I am a painting contractor. I takes contract for painting of single residential units (otherwise than part of a residential complex) only.

In order to avoid to the complication of work contract, I have enters into pure agent agreement with my customers where in the agreement, it is clearly specifies that I will purchase materials paint on their behalf. Material bill I purchase from third party will be billed in the name of my customer not mine. I dont make any profit on material purchased. But all the payments i.e material portion, labour portion, profit on labour portion comes to my bank account.

So my contract is purely labour contract. No material part. Labour portion and profit on labour will exceed service tax turnover limit.

Question 1

Can I enter into pure agent like this to make my turnover only Labour portion.?

Question 2

Under what category, I will take Service taax registration.

00440290 - Industrial or commercial service - Not possible because my service is for residential building

00440334-Construction of residential complex - Not possible because my service not to a complex comprising more than 12 residential units. My service is for single residential unit.(as mentioned above)

00440245 - Maintenance or repair service - Not possible because my service is not maintenance or repair service.

00440410 - Works contract service - Not possible because there is no transfer of property in goods

00440060 - Manpower Supply - Not possible - I am not just supplying manpower. Labourers are working under my supervision. Only labourers who painting work are sent to site to paint.

Please advice

Question 3

Painting contract is given by to me by house owners.

Under Mega exemption - it is mentioned that Services by way of Construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as part of residential complex is exempted from Service tax.

By general definition of Commercial or industrial construction service Section 65(25b), Construction of residential complex service Section 65(30a), and work contract service section 65(105)(zzza)- All these services includes Completion and finishing service. My painting work is completion and finishing service and thus my work falls in services by way of construction for mega exemption.

So am I not eligible to get exemption under mega exemption?

Kindly advise how to interpret exemption.

Regards,

Siva

[KASTURI SETHI]

Sh.Siva Rama Ji,

Point-wise views are as under:-

1. You can provide service as pure agent on the condition that no amount on account of purchase of material should be credited into your bank account. You must be de-linked with supply of material.

2. Your service falls under the category of erstwhile BAS. You may get yourself registered either under the category of 'Other Than Negative List' or under erstwhile BAS.(Old definitions are for statistical purpose.only) Both are valid for your activity. Pure labour cannot classified under Work Contract Service

3. NO. You are not eligible for exemption under Mega Exemption Notification No.25/12-ST dated 20.6.12 as amended.. See the difference between Serial No.13 and 14 of Notification No.25/12-ST dated 20.6 12 as amended. Sections 65 (25b), 65 (30a) and 65(105)(zzza) exist no more. Old accounting code nos. exist for statistical purpose only. You cannot take shelter of these non-existing definitions. All types of constructions are covered under one roof that is called, "Work Contract Service" and your service is out of this as explained above.

[Ganeshan Kalyani]

Yes, you can do billing of pure labour provided payment for material is also made in the name of the customer in whose name the bill for material is raised.

[DR.MARIAPPAN GOVINDARAJAN]

The explanation given by Sri Sethi is beautiful.

[Siva Rama]

Dear Sethi sir,

Thanks a lot for your nice reply.

Regarding material part, I am a pure agent. I buy material on behalf of my customers. Material will be billed in the name of my customers, not mine. I am not taking any profit on that. I have entered into pure agent agreement before entering into painting contract with my customer in a stamp paper.

Then why it is said that material part should not come to my bank account?

Thanks,

Siva

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[Siva Rama]

Dear all,

In continuation of this query i have posted one more query - Construction of single residential unit- No mega exemption,.

Request your opinion on this.

https://www.taxtmi.com/forum/issue?id=111385

111385

Regards

Siva

[KASTURI SETHI]

Dear Siva Ji,

Such credit entry into your bank account means "MANIPULATION". Be neat and clean and safe. May I ask you why are you interested in such entry when you say that you do not want to earn profit on material ? Why you want to involve yourself ? Why do you not want to de-link yourself from purchase of material in books of accounts ? It is a chain.

[Siva Rama]

Thank you Sethi Sir for your valuable comment. Doubt cleared.

AI Summary

Painting Contractor's Service Tax Query: Pure Agent Role and Mega Exemption Eligibility Under BAS Rules Clarified A painting contractor handling single residential units inquires about service tax implications and classification. The contractor operates as a pure agent, purchasing materials on behalf of customers without profit, aiming to classify his service as purely labor to avoid exceeding service tax limits. He questions eligibility for mega exemption under service tax rules. Responses advise that while he can act as a pure agent, he must ensure material costs don't enter his bank account. His service is categorized under erstwhile BAS, not eligible for mega exemption. Concerns about accounting practices and tax classification are addressed, emphasizing compliance.