Circular No.
147/16/2011 – Service Tax
F.
No. 137/57/2011 – Service Tax
Government
of India
Ministry
of Finance
Department
of Revenue
(Central
Board of Excise & Customs)
****
New
Delhi, 21st October 2011
To
Chief
Commissioners of Central Excise & Customs (All)
Chief
Commissioners of Central Excise (All)
Director
General of Central Excise Intelligence
Director
General of Audit & DGST
Commissioners
of Service Tax (All)
Madam/Sir
Subject: Commercial
construction/infrastructure development projects of road, airports, dams,
tunnels etc, – levy of service tax on various service providers engaged /
associated with such construction work – regarding;
**********
Reference is invited to the Circular
No. 138/07/2011 – Service Tax dated 06.05.2011 wherein it was clarified that
the services provided
by the subcontractors / consultants and other service providers to the Works
Contract Service (WCS) provider in respect of construction of Dams, Tunnels,
Road, Bridges etc. are classifiable as per Section 65 A of the Finance Act, 1994
under respective sub clauses (105) of Section 65 of the Finance Act and are
chargeable to service tax accordingly. Clarification has been requested as to
whether the exemption available to the Works Contract Service providers in
respect of projects involving construction of roads, airports, railways,
transport terminals, bridges, tunnels, dams etc., is also available to the
sub-contractors who provide Works Contract Service to these main contractors in
relation to those very projects.
2. The matter has been examined. Vide the circular referred above, it was
clarified that when the service provider is providing WCS service in respect of
projects involving construction of roads, airports, railways, transport
terminals, bridges, tunnels, dams etc. and he in turn is receiving various services
like Architect service, Consulting Engineer service, Construction of
complex, Design service, Erection Commissioning or installation, Management,
maintenance or repair etc., which are used by him in providing output service,
then while exemption is available to the main contractor (as per Section 65
(zzzza) of the Finance Act) , as regards the services
provided by its subcontractors, the same are distinctly classifiable under the
respective sub-clauses of section 65 (105) of the Finance Act, as per their
description and that their taxability shall be decided accordingly. It is thus apparent that just because the
main contractor is providing the WCS service in respect of projects involving
construction of roads, airports, railways, transport terminals, bridges,
tunnels, dams etc., it would not automatically lead to the classification of
services being provided by the sub-contractor to the contractor as WCS.
Rather, the classification would have to be independently done as per the rules
and the taxability would get decided accordingly.
3. However, it is also apparent that in case the
services provided by the sub-contractors to the main contractor are
independently classifiable under WCS, then they too will get the benefit of
exemption so long as they are in relation to the infrastructure projects
mentioned above. Thus, it may happen that the main infrastructure
projects of execution of works contract in respect of roads, airports, railways,
transport terminals, bridges tunnels and dams, is sub-divided into several
sub-projects and each such sub-project is assigned by the main contractor to the
various sub-contractors. In such cases, if the sub-contractors are providing
works contract service to the main contractor for completion of the main
contract, then service tax is obviously not leviable on the works contract
service provided by such sub-contractor.
It
is hoped that this clarifies the statutory position. The Circular may please be
widely disseminated to the trade and field formations.
Yours
faithfully
(Deepankar
Aron)
Director
(Service Tax)
CBEC,
New Delhi
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