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

Debate Over Service Tax Liability for Contractors with Local Authorities: Commercial vs. Non-Commercial Purposes Under Scrutiny A query was raised regarding whether contractors working for local authorities or municipal corporations are liable for service tax, as these entities are not considered part of the government for service tax purposes. One response suggested confirming tax liabilities with the local authority before executing contracts and advised charging service tax initially. Another response argued that contracts with municipal authorities are not taxable under service tax as they are not for commercial purposes. The discussion highlights differing interpretations of service tax applicability on works contracts with local authorities.