Construction services under Mega exemption notification

Construction services under Mega exemption notification :

A. Construction services provided to Government: Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(i) 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;

(ii) canal, dam or other irrigation works;

(iii) pipeline, conduit or plant for

(a) water supply

(b) water treatment, or

are exempt from service tax.

ANALYSIS

It is important to note here that exemption would be available only if the aforesaid specified services have been provided TO the Government or local authority or Governmental authority. Such services provided to any other person would not be eligible for exemption.

Local authority means—

(i) Panchayat as referred to in clause (d) of article 243 of the Constitution.

(ii) Municipality as referred to in clause (e) of article 243P of the Constitution.

(iii) 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.

(iv) Cantonment Board as defined in section 3 of the Cantonments Act, 2006.

(v) Regional council or a district council constituted under the Sixth Schedule to the Constitution.

(vi) Development board constituted under article 371 of the Constitution.

(vii) Regional council constituted under article 371A of the Constitution [Section 65B(31)].

B. Construction of specific buildings/structures: Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

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

Thus, construction of roads which are not for general public use e.g. construction ofroads in a factory, residential complex would be taxable.

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

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

(iv) a pollution control or effluent treatment plant, except located as a part of a factory; or a structure meant for funeral, burial or cremation of deceased;

are exempt from service tax.

C. Construction of original works relating to specific structures/buildings/infrastructure: Services by way of construction, erection, commissioning, or installation of original works pertaining to, –

(i) railways, including monorail or metro;

Repair, maintenance of airports, ports and railways would be liable to service tax and the same is available as input tax credit to railways, port or airport authority, if other conditions are met.

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

(iii) low- cost houses up to a carpet area of 60 square metres 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;

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

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

are exempt from service tax.

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

2. Single residential unit means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family.

3. Original works means

(i) all new constructions;

(ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

(iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise.

Illustrations:

Determine whether the service tax is payable in the following cases: –

1. Sambhav Contractors is constructing a two – floor house for Mr. Ravi Mukherjee.

Service tax is payable on construction of a residential complex having more than one single residential unit. Single residential unit is defined in the notification and means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family.

If each of the floors of Mr. Ravi‘s house is a single residential unit in terms of the definition, Sambhav Contractors is liable to pay service tax. If the title of each of floors is capable of being transferred to another person by mutation in land/ municipal records, both the floors may be considered as separate single residential units.

2. Mojani Ltd. is engaged in the erection and installation of machineries and equipments in the wheat flour mill for Rajul Enterprises.

There is no service tax liability on erection or installation of machineries or equipments for units processing agricultural produce as food stuff excluding alcoholic beverages. Rajul Enterprises is processing wheat (an agricultural produce) to make flour. Thus, service tax is not payable in this case.

Leave a Reply