QUESTION

M/s. IRCON International Ltd. (undertaking by Ministry of Railway) had done civil work(Railway Siding) and electrification work for Rajasthan Rajya Vidyut utpadan Nigam Ltd. for setting up kalisindh Thermal Power Station in the FY 2015-16. M/s. IRCON Internation Ltd. is Contractor/Supplier. 1. Is service tax leviable on payment received by M/s. IRCON Internation Ltd. 2. Since material is also suppied by M/s. IRCON Internation Ltd. , is it cover under Work Contract Service 3. Please send relevant case law favouring service tax applicability on M/s. IRCON Internation Ltd. .

ANSWER

Facts of the case: An undertaking by Ministry of Railway had done civil work(Railway Siding) and electrification work for Rajasthan Rajya Vidyut utpadan Nigam Ltd. for setting up kalisindh Thermal Power Station in the FY 2015-16. Whether service tax leviable on payment received by supplier/contractor. Since material is also suppied by supplier, is it covered under Work Contract Service?

Law Applicable: Notification No. 25/2012-ST

---------------------hereby exempts the following taxable services from the whole of the service tax leviable thereon under section 66B of the said Act, namely

12A. 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 -

(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 structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or

(c) 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;

under a contract which had been entered into prior to the 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date:

provided that nothing contained in this entry shall apply on or after the 1st April, 2020;";]

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

(a) railways, excluding monorail and metro;

Explanation.-The services by way of construction, erection, commissioning or installation of original works pertaining to monorail or metro, where contracts were entered into before 1st March, 2016, on which appropriate stamp duty, was paid, shall remain exempt.".]

Section 65- Definition

'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;

Interpretation: Notification No. 25/2012-ST exempts 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 a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession.

Further it also exempts Services by way of construction, erection, commissioning, or installation of original works pertaining to railways.

NOTE: In order to avail the benefit of exemption, check whether the exemption Notification is applicable in your case or not. (Reply dt. 20/04/2021)