Definition of Govt. for the purpose of Service Tax - coverage of local authority/MC

[DINESH MITTAL]

Respected sir, Contractor laying out sewerage/water supply pipe lines for the local authority/MC. Service Tax Deptt. says that local developement authority or municipal corporations are not covered under Govt. for the purpose of service tax, so the contractor is laible for service tax. Now, my question is, what is the definition of Govt. for the purpose of Service Tax.

[Vijay Chitte]

There is no specific exemption given, in case service provide to local authority / Municipal corporations. Before executive any contract with the local authority / Municipal corporations, you have to confirm the said department, regarding the levy of any taxes. Safer side, First you have to charge the service tax, letter any confirmantion from the local authority, you have to decide based on the fact. I think department is correct.

[Rama Krishana]

Under the works contract category of service tax, only a contract which is primarily for commercial user is taxable. Since the execution of works contract for municipal authorities can not be held as commercial, no service tax is leviable on the same.

AI Summary

Scope of Government exemption may exclude municipal authorities, affecting service tax liability on works contracts. One administrative view treats local development authorities and municipal corporations as outside the scope of Government exemption, making contractors liable to charge service tax and prompting practitioners to seek departmental confirmation and to charge service tax as a precaution; an alternative view applies the Works Contract commercial-user test, contending that works for municipal authorities are not primarily commercial and therefore not taxable.