Service tax applicability on renting cranes for metro rail work

[Shivam Gaur]

Dear experts,

Kindly provide your precious views over applicability of service tax on the contract where a party has agreed to provide cranes for fixing barricades to metro corporation. The contract provides for minimum barricading to be put, and contract is for piece meal rate, however also states that even if party does not put minimum barricades to place, it will still be paid minimum prescribed amount.

Can this be claimed as exempt from service tax?

This case is of 2015-16

[KASTURI SETHI]

This service falls under, "Right To use of Tangible goods Services" specified under Section 65(105)(zzzzj) of the Finance Act. No exemption from ST is available. Not available even in Notification No.25/12-ST as amended.

Will you provide cranes only ? Will you provide manpower ? Terms and conditions in the contract are worth reading for more clarity in reply.

[Shivam Gaur]

Highly appreciate your reply sir.

Sir, the crane was made available for 24 hours for 26 days a month, to erect at least 40 pieces of barricades for which party was promised to be paid ₹ 2750/ barricade, i.e. 1,10,000/- (excluding diesel)

Two cranes and two operators were provided by the party to the metro corporation

The contract also provided that in case of lesser erections of barricades the party will still be paid ₹ 1,10,000/-

[KASTURI SETHI]

Position after 1.7.12

ST is also payable on the amount of Rs,1,10,000/- as it is covered under Section 66 E(e) of the Finance Act which is extracted below:-

SECTION [66E. Declared services. - The following shall constitute declared services, namely

(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

(f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods. Possession and effective control remain with the owner. Hence ST leviable.

AI Summary

Right to use of tangible goods: service tax applies to crane hire with guaranteed minimum payment obligations. Supply of cranes (with operators) for metro barricading constitutes Right To Use of Tangible Goods Services and falls within the scope of declared services covering obligations to do or tolerate acts and hiring/transfer of goods without transfer of right to use. Service tax is leviable on the guaranteed minimum payment under the contract even if the minimum barricade erections are not achieved, and the exemption notification is inapplicable.