Service Tax on labour contract for construction services

[NANDKUMAR SAGWEKAR]

Dear All Learned Members

Education institute registered as a charitable trust had undertaken construction of education complex consisting of office , guest house, gaints and ladies hostel, class room , laboratory rooms etc . The said trust is providing all materials like cement , steel, sand ,colour and contractor has to construct the building with materials. The per square feet rates are decided by trust and contractor mutually as per each type of work like plinth, slabs , walls etc.

In this case whether contractor is liable to pay the service contract before and after 30-June-2012 , or he is exempt from service tax upto 30-June-2012.

Views of members are invited.

 

Thanks

 

A M SHEMBEKAR

 

[dipsang vadhel]

Prior to 01.07.2012,

ST was payable on services defined as taxable services under the Finance Act. Accordingly, only commercial constrction was liable to service tax.Constructions which is for use of organisations or institutions being established soley for educational, religious,charitable,health,sanitation or philanthropic purposes and not for the purpose of profit are not taxable,being non commercial in nature. (Board's circular No.80/10/2004-St dated 17.09.2004).

If construction of Educational Institute in your case is not commercial in nture then NO ST.

On or after 01.07.2012

ST is payable on all services except services covered in Negative List or exemption list. As per my analysis,construction of Educational Institute even if for non commercial purpose is neither covered in Netive list nor exemption list. At present, such exemption is availble for construction of educational institute is availble only if such construction is for government. Therefore,construction of Educational Institute in your case is liable to ST even if such construction is for non commercial purpose. Refer Educational guidance released by CBECparticularly

7.9.4 I am engaged in construction of hospitals and educational institutes. Am I required to pay service tax?

If you are constructing such structures for the government, a local authority or a governmental authority, you are not required to pay service tax. If you are constructing for others, you are required to pay tax.

regards,

dipsang vadhel

[NANDKUMAR SAGWEKAR]

Dear Mr. Dipsang vadhel

I am very much thankful to you for prompt reply

 

Thanks

 

A M SHEMBEKAR

AI Summary

Service tax on construction services applies to non-government educational projects; only government projects remain exempt.
Prior to the revised regime, only commercial construction was taxable and construction for educational or charitable institutions established solely for non profit purposes was not subject to service tax. Under the post reform negative list framework, construction of educational institutes for non governmental entities is not covered by the negative list or available exemptions, so such construction attracts service tax; the exemption for educational construction applies only when undertaken for government or specified governmental authorities.