Activity - Liable to service tax

[sunil mehta]

A service provider errects monsoon sheds/parking sheds,storage godowns (made out of alluminium/pvc sheets) at clients' factory or ofice pemises ,as per their needs and gives it on hire for a period ranging from 1 mth. to 12 mths. on mthly. basis or lump sum basis.The above so called errected sheds are dismantled by service provider when the hire period gets over and he takes away those sheets to his place.These sheds are not meant for any social/official/business functions.They are meant for protection from rains or parking etc purpose.There is no sale of sheds.It is purely hire of sheds. Query:1)whether the above activity is liable to service tax? 2) if yes,then under which category? 3)If hire is not liable to ser.tax, then whether errection and dismantling of temporary sheds by service provider can fall under errection,comm.installation category?

[Surender Gupta]

Apart from "Erection, Commissioning & Installation" Category, you may consider the meaning of "Infrastructure Support Service (ISS)" within the category of "Business Support Service" since ISS is inclusive one.

[Guest]

I am of the view that the service may not be covered under ‘infrastructual support’ under Business support service as the same would only providing of office space along with other facilities. The same may not also be covered erection, commissioning, installation etc. With the above position, I am of the view that: a. As such the activity can be considered in the nature of ‘transfer of right to use of sheds etc’ (i.e. leasing of sheds) and this activity is called ‘operating lease’. In that case, the activity would perse liable for Sales tax and it is not known what stand you are taking in respect of sales tax. b. Operating lease is not covered under the service tax net (i.e. Service tax category of Banking and other financial services covers only financial lease) and thus no service tax liability is attracted.

AI Summary

Operating lease of temporary sheds may not attract service tax and could instead fall under sales tax. A provider erects temporary sheds at client premises, hires them out and later dismantles them. One view treats the activity as Erection, Commissioning & Installation or as Infrastructure Support Service within Business Support Service; an alternative view treats the arrangement as a transfer of right to use (an operating lease), which would attract sales tax rather than service tax because operating leases are not covered by the cited service tax categories.