Exemption from Service Tax if service provided to the trust registered under section 12AA of Income Tax Act 1961

[Sudhir Kumar]

A firm is registered under section 12AA of income Tax Act, 1961(43 of 1961). A client has provided the firm work contract services by way of construction of Higher Secondary Education Building. The client has sought exemption from Service Tax in light of the entry sl. no. 13(c) of the Exemption Notification No. 25/2012-ST dated 20.06.2012 giving reference to the CESTAT Final Order No. 51031/2022 dated 31.10.2022 - 2022 (11) TMI 47 - CESTAT NEW DELHI. But the department has denied the claim of the client and confirmed the demand citing that 13(c) of exemption notification mention about the exemption from those work contract services which were meant predominently for religious use by general public. Since, in the instant matter the client has provided work contract service by way of construction of Secondary School hence, the construction of School can not be correlated to the religious use go general public. Hence, exemption can not be extended to the client.

Please give further direction.

AI Summary

Service tax exemption for construction services to registered charitable trusts may be claimed under charitable-purpose entry, not religious-use.
Entry 13(c) requires predominately religious use and thus does not cover construction of a school; the claimant should instead press exemption under Entry 13(a) by proving trust registration, that the construction furthers the trust's charitable object of education, and supporting the claim with the trust deed, registration, documentary evidence and the cited CESTAT order, while taking account of amendments that narrowed educational-service exemptions for the relevant period.