Circular No.79/9/2004-ST dated 17/09/2004

[Guest]

One of my client is a contractor doing civil construction work for Ordinance Factory.  According to aforesaid circular , Government constructions normally would not be taxable, if it is used for residential, office purpose or for providing civic amenities.  However, Superintendent, Service Tax insists for levying service tax  on construction works after an abatement of 67% on gross amount of contract works. kindly let me know the correct position of leviability of Service tax  on construction work of Ordinance Factory.

[Mahir S]

The Circular No. 79/9/2004 - ST dated 17/09/2004 pertains to Appllication of Service Tax on activities relating to Erection and Commissioning and does pertain for such activities referred in your query.

The learned Superintendent is correct and full exemption fom payment of Service Tax shall not be available for such constructions, as no Notification/Circular issued granting such exemption.

[NEERAJ KUMAR, RANCHI]

Dear Mr Mundra,

In my view Government construction, if the purpose of this is not profit oriented or commercial it will definitely not attract service tax. Have the superintendent issued any demand for payment of this service tax?.  If not , by what way he is insisting. You can ask him to refer to the provision related to constructionn services.

AI Summary

Service tax on government construction may apply where no exemption notification, enabling assessment after abatement. Leviability of Service Tax on construction for a government Ordinance Factory depends on whether a specific exemption exists; absent an express notification or circular exempting the activity, service tax may be levied and assessed, and departmental reliance on an erection/commissioning circular does not establish a blanket exclusion.