Date : 28/07/2007 09:59:05

The government today (27 July 2007) said it would issue clarification on works contract which was included under service tax net this year. "We will issue clarification with regard to the ongoing contract after formal examination," Finance Ministry Joint Secretary (TRU-II) R Sekar said at Service Tax conference organised by Assocham here.

Without giving a timeframe, he said the clarification would help in addressing confusions about various issues.

Works contract involves transfer of goods and services. Under the category, tax is levied on services rendered in the execution of such contracts.

Services, covered under the tax regime, are contract for carrying out erection or installation and commercial or industrial construction.

Besides, it also includes works contract for turnkey projects and contract for construction of complex.

However, contract in respect of specified infrastructure projects namely roads, airports, railways, ports etc are exempt from the ambit of service tax.

Earlier, Central Board of Excise and Customs member P C Jha said two master circulars on service tax will be issued by the end of next month as part of simplification procedure.

"We are in the process of finalising it (circulars) and should not take more than a month to issue these circulars," he said.

The master circulars would be on technical and procedural issues, he said.

Works contract inclusion under service tax to be clarified, defining taxable construction services and key infrastructure exemptions. The government will issue formal clarification on the inclusion of works contract within the service tax net to resolve scope uncertainties; works contracts involve transfer of goods and services and taxable components include erection or installation, commercial or industrial construction, turnkey projects and construction of complex, while specified infrastructure projects such as roads, airports, railways and ports are excluded; CBEC will issue two master circulars on technical and procedural service tax issues.