Dear Friends,
Service Tax department has now come with a innovative clarification on the subject of service Tax on the construction & repairs of Road .Details about services related to Road has been mentioned in following two services.
- Commercial Or industrial Construction Service [section 65(105)(zzq)]10.09.2004
- Works Contract [section 65(105)(zzzza)]01.06.2007
Services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams has been specifically excluded from the definition/scope of above service ,though above services had been added in service tax on 10.09.2004 and 01.06.2007.Means govt intend isto exempt these(road dams etc) services from the service tax.
Definitions as per both the above section has been given below
section 65(105)(zzq)
“commercial or industrial construction service” means —
(a) construction of a new building or a civil structure or a part thereof; or
(b) construction of pipeline or conduit; or
(c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or
(d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is —
(i) used, or to be used, primarily for; or
(ii) occupied, or to be occupied, primarily with; or
(iii) engaged, or to be engaged, primarily in,
commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams;
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section 65(105)(zzzza)
to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.
Explanation.—For the purposes of this sub-clause, “works contract” means a contract wherein,—
(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and
(ii) such contract is for the purposes of carrying out,—
(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or
(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or
(c) construction of a new residential complex or a part thereof; or
(d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or
(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;
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In above sections services provided in respect of Roads has been specifically exempted without mentioning repair of Road or construction of road but department in his circular (given below )110 dt 23.02.2009 has clarified that though the road repair has not been covered under zzq or zzzza but there is no such exemption under clause zzg (to any person, by any person in relation to management, maintenance or repair;) so repair of road is taxable service .Further classification of various activities related to road, which are covered and which are not has been given.However this view is not binding on assessee or adjudicating authorities.Iintention of, the Legislature is to exclude this service from tax net. In Dr. Lal Path Lab (P.) Ltd.v. CCE (2006) 5 STT 171 (CESTAT), it was held that if a service has been specifically excluded from definition of one service, it cannot be covered under another taxable service.
Please Comment.
Full Text of the circular is given here under.
Circular No. 110/4/2009-ST.
F. No. 345/ 17 /2008-TRU
Government of India
Ministry of Finance
Department of Revenue
Tax Research Unit
*****
New Delhi, the 23rd February, 2009.
Subject: Reference from Commissioner Nashik seeking clarification in respect of levy of service tax on Repair/ renovation/ widening of roads – Regarding.
Representations have been received by the Board pointing out divergent practices being followed by field formations with regard to levy of service tax on maintenance and repair of roads.
2. Commercial or industrial construction service [section 65(105) (zzq)] specifically excludes construction or repairs of roads. However, management, maintenance or repair provided under a contract or an agreement in relation to properties, whether immovable or not, is leviable to service tax under section 65(105) (zzg) of the Finance Act, 1994. There is no specific exemption under this service for maintenance or repair of roads etc. Reading the definitions of these two taxable services in tandem leads to the conclusion that while construction of road is not a taxable service, management, maintenance or repair of roads are in the nature of taxable services, attracting service tax.
3. The next issue requiring resolution is the types of activities that can be called as ‘construction of road’ as against the activities which should fall under the category of maintenance or repair of roads. In this regard the technical literature on the subject indicate that the activities can be categorized as follows,-
(A) Maintenance or repair activities:
I. Resurfacing
II. Renovation
III. Strengthening
IV. Relaying
V. Filling of potholes
(B) Construction Activities:
I. Laying of a new road
II. Widening of narrow road to broader road (such as conversion of a two lane road to a four lane road)
III. Changing road surface ( graveled road to metalled road/ metalled road to blacktopped/ blacktopped to concrete etc)
4. The cases may be decided/ revenue should be protected based on the above classification. Suitable Trade and Public notices may be issued for information of the trade and field formations.
5. Receipt of this Circular may please be acknowledged.
6. Hindi Version will follow.
Yours faithfully,
(Unmesh Sharad Wagh)
Under Secretary (TRU)
Update :27.07.2009
In reply to debate on finance bill 2(2009) FM has declared that no service tax is applicable on repair & maintenance of Roads.Circular is given below
EXEMPTION TO MAINTENANCE OF ROADS
NOTIFICATION NO. 24/2009 - SERVICE TAX, DATED 27-7-2009
In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service, referred to in sub-clause (zzg) of clause (105) of section 65 of the Finance Act,1994, provided to any person by any other person in relation to management, maintenance or repair of roads, from the whole of the service tax leviable thereon under section 66 of the said Finance Act.
