Merchants' Chamber of Commerce
A Workshop was organized today by Merchants’ Chamber of Commerce on ‘Service Tax on Construction Industry’. Shri Gautam Bhattacharya, Joint Secretary (TRU), Ministry of Finance, Govt. of India, started his deliberation with his remark that the Law regarding Service Tax on Construction Industry as on date is not a full proof Law. A number of issues still need to be addressed for which he invited issues and suggestions from the members of the Industry, Trade and Professions, with a suggested solution. He further said the Government is open to constructive criticism and suggestions.
There was a demand of Cenvat Credit of Service Taxes paid on input services to be set off against Service Tax liability on construction by builders, to which he responded positively and asked for a specific representation from the Chamber. Regarding completion Certificate to be issued by Architect/Engineers he said that such certificates issued by any competent technical person if acceptable under any Law may also be acceptable for Service Tax purpose to determine the Service Taxes liability on on-going projects.
Shri Arun Kr. Agarwal, Chairman, Standing Committee on Indirect Taxes, of Merchants’ Chamber of Commerce told that as a policy measure to support low cost housing (valued up to Rs. 20 lacs), an interest sub-vention of one per cent is being given, which amounts to maximum Rs. 10,000/- for a property of 20 lacs, whereas the service tax levy would take away additional Rs. 25,000/-. This seems to be a self contradiction in the Housing Policy of the Govt. of India. Hence, taxes need to be kept off, as far as possible, in order to stimulate the growth of housing sector and minimise the transaction costs.
So far we knew that under the Constitution of India, immovable property is a State Subject. Therefore, State /Govts. Already levy stamp duty on the entire consideration of the property, which comprises of cost of Land, Materials and Labour / Services, and of course profit. Now, out of the same consideration, the labour component together with the profit attributable to such component is made chargeable to service tax, which is a levy of the Central Govt. The Supreme Court has very categorically held that the same component cannot be charged to both Sales tax and service tax. That is, either the component is ‘goods’ or ‘service’. Then, by way of a deeming provision, how can the same component be a part of immovable property as well as a service.