Applicability of Service tax while the work of construction has been done by the client.

[Sudhir Kumar]

Sir,

(i) Whether the Bihar State Building Construction Corporation, Patna is not a Government body and construction of primary health centre under agreement executed with them is not an exempted service under the mega exemption notification no. 25/2012-ST dated 20.06.2012.

(ii) Whether the construction of Buniyadi Kendra under agreement with Bihar State Building Construction Corporation, Patna is not exempted for service tax liability under notification no. 25/2012-ST dated 20.06.2012.

(iii) Whether the construction of 5000 mt peb godown under agreement with Bihar State Building Construction Corporation, Patna is not exempted from Service Tax under agreement executed with Bihar State Building Construction Corporation, Patna.

My client has given service by way of construction of the above mentioned building under the agreement executed with the BSBCCL, Patna a few of the agreement was executed before 01.03.2015 and two agreement was executed after 01.03.2015. But the department has not accepted the submission and calculated the tax on full amount received by the client from the BSBCCL, Patna however, they service provided by the client fall under the exemption notification and liable to be given benefit of exemption but the department has not considered the submission.

[KASTURI SETHI]

The department is 100 % correct.  Bihar State Building Construction Corporation, Patna  does not conform to the definition of Govt.  It is a body corporate as per the Company Act. Hence no exemption  from Service Tax is admissible.

[Sudhir Kumar]

Is the client no liable for abatement under Rule 2A(ii)a of the Service Tax Rule and benefit of RCM under notification no. 30/2012-ST dated 20.06.2012.

[KASTURI SETHI]

What is constitution of the service provider's firm  ? Whether individual or proprietorship or partnership  or HUF  ? 

[Sudhir Kumar]

Proprietorship firm

[KASTURI SETHI]

Abatement is allowed but subject to produce proof of sale of material as discussed above.

AI Summary

Exemption denial for non-government body: construction services treated as taxable; abatement possible with proof of material sales. Construction contracts with an entity that is a body corporate under company law do not qualify as a government body and therefore are not eligible for the mega exemption; construction services provided under such agreements are liable to service tax. For a proprietorship service provider, abatement under the service tax rules may be available, contingent on documentary proof of sale of materials to substantiate the reduced taxable value; reverse charge implications are noted but entitlement to abatement depends on producing required evidence.