SERVICE TAX ON GRANT RECD FROM GOVT

[udit gupta]

We wish to know the service tax applicability as service provider against the grant received from Ministry of Govt of India for incurring the expenses related to the project on their behalf. Please clarify whether the service tax would be applicable on the said grant received or not as service provider. Please support your comments with the relevent section & law defining the same.

[Brijesh Verma]

You need to first elaborate the exact nature of activities which Government wants you/your client to execute. Overall, any non-commercial activity by a Government is tax free, but any firm opinion can be framed only if few more details are available.

[udit gupta]

To continue, it's a project where we need to train & recurit some numbers of unemployed rural youth under the rurual development programme of ministry & we need to show them atleast 90% utilization of the grant recd from the ministry for the expenses to be incurred for their training, recuitment & other outsourcing services in relation to the same.

AI Summary

Service tax applicability on grants for government sponsored training depends on the nature of services provided. Service tax applicability on government grants to execute a ministry project depends on whether the recipient provides taxable services or merely incurs reimbursable expenses on the ministry's behalf; non commercial government activities are broadly tax free, but a conclusive view requires specific facts about the contractual role and the nature of training, recruitment and outsourcing services funded by the grant.