Clearify Service Tax

[subhash komalwar]

Dear sir,

               We are the Borewells & Tubewells contractors since 25/11/2010 out the earth drilling work in all formation of earth in Chandrapur & Gadchiroli districts of maharastra state of zilla parishads under state govt. scheme & Private work as well for the purpose of Drinking water only.

              So kindly clarify to us whether the services which are rendered to excavate the borewells & Tubewells incluidng Installation of Hand Pump over said Borewells & Tubewells may be govt. or private for Drinking water only, are liable for Service Tax or otherwise please.

Thanking you

[Guest]

This involves two segments - one is drilling of borewells using only the labour and other involving drilling and equipping with materials.  If  only labour supply is involved this will be treated accordingly.  Otherwise it is whole turn key contract including materials then VAT also involved.  It is left to you either to treat it as a turnkey 'Works contract'  and pay service tax or pay VAT @ 5% (check VAT rate in Maharashtra, some state govt. exempt from tax if it is for drining water in drought hit/backward areas) in which case no service tax is applicable.

AI Summary

Clarification on Tax for Borewell and Tubewell Services: Service Tax or VAT May Apply Based on Contract Details. A contractor in Maharashtra sought clarification on whether services for drilling borewells and tubewells, including hand pump installation for drinking water, are subject to service tax. The response explained that if only labor is involved, it is treated accordingly. If the contract includes materials, it may be considered a turnkey works contract, requiring either service tax or VAT payment. VAT might be applicable at a 5% rate, but exemptions could apply in certain areas for drinking water projects.