Service Tax on Construction activity- Part-II

[R.S. Mangal]

                                                    Exemptions:

 Following are the exemption allowed on construction activities--

1. Exemption given at Sr No 12 of  Notification No 25/2012 ST Dated 20.06.2012  (Mega Exemption) inter alia provides that

     Services provided to

è    Government

è    Local Authority or a Govt. Authority

            by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of-

(a)  a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b)  a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

(c)  a structure meant predominantly for use as

• an educational,
• a clinical, or
• an art or cultural establishment;

(d)  Canal, dam or other irrigation works;

(e)  Pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

(f)  a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;

Notes-

It is clarified by CBEC that the significance of the word predominantly is that benefit of exemption will not be denied if the building is also incidentally used for some other purposes if it is not used primarily for commerce, industry, or any other business or profession.

Persons specified in the Explanation 1 to clause 44 of section 65 B

                                             Members of

 

Parliament   State Legislative   Municipalities    Panchayats   Other local authorities

Or a person who holds any post in pursuance of the provisions of the Constitution, person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority.

2. Exemption given at Sr No 13 of  Notification No 25/2012 ST- Dated 20.06.2012

    Inter alia provides that

Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a)  a road, bridge, tunnel, or terminal for road transportation for use by general public;

(b)  a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

(c)  a building owned by an entity registered under section 12 AA of the Income tax Act, 1961 (43 of 1961) and meant predominantly for religious use by general public;

(d)  A pollution control or effluent treatment plant, except located as a part of a factory; or

(e)  A structure meant for funeral, burial or cremation of deceased;

3. Exemption given at Sr No 14 of  Notification No 25/2012 ST- Dated 20.06.2012 inter alia provides that

Services by way of construction, erection, commissioning, or installation of original works pertaining to,-

(a)  an airport, port or railways, including monorail or metro;

(b)  a single residential unit otherwise than as a part of a residential complex;

(c)  low-cost houses up to a carpet area of 60 square meters per house in a housing project approved by competent authority empowered under the 'Scheme of Affordable Housing in Partnership' framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

(d)  post-harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or

(e)  mechanized food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;

Note – Thus under this exemption given at Sr 14, only Original works are exempted and thus completion, fitting out, repair, maintenance, renovation, or alteration are taxable.

Abatement on construction activities

Serial No 12   Notification No 26/2012 ST Dated 20.06.2012

Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority

Abatement of 75% on the amount charged

(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii)The value of land is included in the amount charged from the service receiver.

The amount charged shall be  the sum total of the  amount charged for the service including the fair market value of all goods and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract, after deducting-

• the amount charged for such goods or services supplied to the service provider, if any; and
• the value added tax or sales tax, if any, levied thereon:

Provided that the where the fair value of goods or services so supplied  is not   ascertainable then same can be determined with the help of generally accepted accounting principles.

Reverse Charge liability-

Reverse Charge liability is also there on services rendered by service providers located   outside the taxable territory to service recipient located in taxable territory. However, there is exemption if Services received from a provider of service located in a non- taxable territory to-

•   Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;
•   An entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities

The Construction services will fall under Works Contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods. If such construction services are provided by Individual/Firm/LLP to a Body Corporate then  50% service tax on works contract will be paid by the service recipient and 50% will be paid by the service provider as per Notification No. 30/2012-Service tax dated 20/06/2012. taxmanagementindia.com

Meanings and Definitions:

"governmental authority" means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution;

“original works” has the meaning assigned to it in Rule 2A of the Service Tax (Determination of Value) Rules, 2006

“residential complex” means any complex comprising of a building or buildings, having more than one single residential unit.

“single residential unit" means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family;

"local authority" means-

•  Panchayat as referred to in clause (d) of article 243 of the Constitution;
•  Municipality as referred to in clause (e) of article 243P of the Constitution;
•  Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund;
•  Cantonment Board as defined in section 3 of the Cantonments Act, 2006; (41 of 2006.)
•  regional council or a district council constituted under the Sixth Schedule to the Constitution;
•  development board constituted under article 371 of the Constitution; or
•  regional council constituted under article 371A of the Constitution;

"general public" means the body of people at large sufficiently defined by some common quality of public or impersonal nature;

"agricultural produce" means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market;

Contd--