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Comments
(NILESH BHANDARI) Posted On: 18 Jun, 2013

We are in the business of power generation thru wind mills.For installation of wind mills at remote / forest location we are buying land and subsequently we build road network to connect these wind mills. Road are most critical requirement as these helps in the movement of men/material/vehicles during installation and also for maintenance. For construction of these Roads we use services of civil contractors. For pure labour work involved in Road construction we issue work order with 12.36% of service tax impact and for the material to be used in Road we issue PO on the contractor with applicable VAT. Please advise 1) whether this treatment is in order or this may be treated as works contract under service tax which may have different treatment all together from service tax point of view . 2) If the service provider is non company what will be impact on us if this is considered as works contract. 3) If this Road contract job is considered as works contract , should we enter into work contract , with both labour and supply cost component. Kindly revert with your advise.

Pure Labour Contracts do not fall in the definition of works contract for the purpose of service tax. To fall in the definition of works contract it is necessary that there should be transfer of property in goods involved in the execution of such contract which is leviable to tax as sale of goods. Pure labour contracts are therefore not works contracts. Since such contracts are not works contract, the reverse charge mechanism is also not applicable and the entire service tax is payable by the service provider only. However, even if a small part of material is supplied by the contractor alongwith services, it will come under the definition of works contract and accordingly reverse charge will be applicable if the service provider is an individual/HUF/Partnership firm/AOP. Also, kindly have a note that the services in relation to construction of roads are exempted under entry no. 13 of notification no. 25/2012-ST dated 20.6.2012; w.e.f. 1.7.2012 if the roads are being constructed for use of general public. Thus, if we can prove that the roads in our case are being constructed for use by general public, we can claim total exemption from service tax.
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PRADEEP JAIN, F.C.A.

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Address :
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Phone No. :
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Address:
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