Works Contract Service in respect of canals - Tax liability from 01.06.2007 to 22.10.2009 - 11 C Notification?
WORKS contract service in respect of canals has become taxable w.e.f. 01.06.2007. However, service tax levy on Works contract service in respect of canals other than those primarily used for the purposes of commerce or Industry was exempt from 23.10.2009 vide notification No.41/09-Service Tax dated 23.10.2009 and 25/2012-ST dated 20th June, 2012.
Then what about the period prior to 23.10.2009? While reporting Notification No. 41/2009 in DDT 1224 - 27.10.2009, DDT observed, "is this notification clarificatory in nature and thereby applicable retrospectively because it seeks to address a long pending issue or is it only to be read prospectively? Now that there is an exemption from 23rd October, the auditors will have field day and keep the consultants busy by raising demands for the period prior to 23rd October 2009 because there was no exemption."
Well, this is what exactly happened - four years later. Board in a letter to all the Commissioners in May 2013 observed, "However, for the said services provided during period between 01.06.2007 to 22.10.2009 service tax is leviable."
It appears the Government had contemplated issue of Section 11C Notification and called for the data in the month of May 2013. A letter was issued to all the Commissioners seeking data on the total number of service providers, service tax paid for the period from 01.06.2007 to 22.10.2009 and the details of Show Cause Notices issued. Why do they need these figures if the activity was taxable?
However, in spite of lapse of seven months, no Notification has seen the light of the day. Does this mean the idea has been shelved?
This issue is slightly complicated and DDT had covered it extensively in 25.09.2009, 09.10.2009 and - 27.10.2009. The Board had not canalised its thoughts properly on this issue right from the beginning.
- 12.12.2012 had actually suggested that Government should issue a Section 11C notification for canals and water projects.
Now, was it the intention of the Government to tax construction of canals during the period 01.06.2007 to 22.10.2009 and exempt it later? What was the logic in taxing it for a short period?
TRU letter F. No 354/74/2013-TRU dated May 14, 2013