Saturday, August 27, 2016

Service Tax on Construction Industry

Under the new regime of service tax i.e after 01.07.2012 service tax on construction service is explained u/s 66 E(b) i.e. declared service of the Finance Act,1994. The constitutional validity was also upheld under old regime in case of Maharashtra Chamber of Housing Industry v. Union of India (2012-TIOL-78) and G.S. Promoters v. Union of India (2010-TIOL-813-HC-P&H).
Let us now understand service tax on construction industry under present scenario :

B. Taxable services :

Tax Code Name of service
00440334 Construction of res. Complex
00440290 Construction services in respect of commercial or industrial buildings and civil structures

C. Provisions under Negative List :


There is no clause u/s 66 D which relates to construction industry i.e. there is no entry under said list which specifies that no service tax is payable on construction services.

D. Provisions under Mega Exemption :

Following are the services which are being exempt from service tax:


12. 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 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 (i) an educational, (ii) a clinical, or (iii) 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 65B of the said Act;

D.2) Entry No 12A (inserted from 1st March, 2016) inserted vide Notification No. 9/2016-Service Tax Dated : 01.03.2016 :-
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.

D.3) Entry no. 13. (w.e.f. 01.07.2012 )

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;

(ba) a civil structure or any other original works pertaining to the ‘In-situ rehabilitation of existing slum dwellers using land as a resource through private participation’ under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers. (Inserted from 1st March, 2016 vide Notification No. 9/2016-Service Tax Dated : 01.03.2016 )

(bb) a civil structure or any other original works pertaining to the ‘Beneficiary-led individual house construction/enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; (inserted from 1st March, 2016 vide Notification No. 9/2016-Service Tax Dated : 01.03.2016)

(c) a building owned by an entity registered under section 12AA 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 a structure meant for funeral, burial or cremation of deceased;

D.4) Entry no. 14. (w.e.f. 01.07.2012 )

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

(a) railways, excluding monorail and metro;

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

[“Single residential unit has been defined in clause ( zc ) of the explanation to Notification No. 25/2012 as a self contained residential unit which is designed for use, wholly or principally, for residential purposes for one family.]

(c) 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;

“(ca) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under :


(i) the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana;

(ii) any housing scheme of a State Government.”. (Inserted from 01.03.2016 )

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

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

D.5) Entry No. 14A (w.e.f. 01.04.2016 vide Notification No. 9/2016-Service Tax Dated : 01.03.2016)

“14A. Services by way of construction, erection, commissioning, or installation of original works pertaining to an airport or port provided under a contract which had been entered into prior to 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date :

Provided that Ministry of Civil Aviation or the Ministry of Shipping in the Government of India, as the case may be, certifies that the contract had been entered into before the 1st March, 2015 :

Provided further that nothing contained in this entry shall apply on or after the 1st April, 2020;”

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