Service Tax on maintenance or repair of roads- Revenue rejects MP CM 's request
The Madhya Pradesh Chief Minister, Shivraj Singh Chauhan sought exemption from Service Tax on maintenance or repair of roads.
Promptly the DGST has written a letter to the field formations,
“You are requested to kindly ensure that service tax is collected from the service providers undertaking management, maintenance or repair of roads and rendering service to Public Works Department of the State or the Central Government or to any other Department of the State or the Central Government.”
Perhaps the poor Chief Minister has prompted the Department to collect the tax. Now Service Tax officers will be on the roads to check up which roads are being maintained or repaired. Now you find our cities being cleaned by hired workers during midnight and early morning. Is the sweeping of the roads, maintenance or repair? As such, our civic bodies are so helplessly handicapped with lack of funds that the roads are in bad shape. Can they afford to pay an additional 12.36% for the repairs and maintenance?
And since when is this road tax leviable?
Clause 64 of Section 65 of the Finance Act, 1944 (when will we have a Service Tax Act – with GST looming large, perhaps no such possibility) defines the service as
(64) " management , maintenance or repair" means any service provided by—
( i ) any person under a contract or an agreement; or
(ii) a manufacturer or any person authorised by him, in relation to,-
(a) management of properties, whether immovable or not;
(b) maintenance or repair of properties, whether immovable or not; or
(c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle;
Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause, "goods" includes computer software;
Is the road an immovable property? It is, at least as per the CBEC. In F.No.B1 / 6 /2005- TRU , dated : July 27, 2005 , the TRU calrfied ,
16. Maintenance or repair service
16.2 Prior to 16/6/2005, such services covered maintenance or repair or servicing of any goods or equipment, excluding motor vehicles. However, since 16/6/2005, services relating to maintenance or management of immovable property (such as roads, airports, railways, buildings, parks, electrical installations and the like) have also been covered under the purview of service tax. Such services would be taxable when provided under a contract or an agreement by any person or by a manufacturer or any person authorized by a manufacturer.
So this tax is leviable from 16.6.2005, but was it being collected? Can the DGST tell the country how much tax was collected on road repairs? Now perhaps SCNs will fly alleging suppression and evasion. Will Municipal Commissioners be summoned to give information about repair contracts given by them in the last three years? The possibilities are exciting and varied. The Service Tax officers can go to remote villages and forests to survey road repair activity and detect evasion. The Border Roads Organisation can also be a good target.
If somebody repairs the Jammu - Pathankot national highway, how will he be taxed, for there is no Service Tax in J&k but it is payable across the border!
Is it worth taxing the road repair? 99% of the roads belong to the Government – state or central, Municipal bodies, panchayats . As mentioned earlier, should the cost of maintaining the horrible roads be enhanced for these fund starved bodies?
Perhaps the FM can graciously accede to the request of the Madhya Pradesh CM and exempt road repair from Service Tax and for this he need not wait for the budget.
And perhaps, the BJP has a political agenda in this request. They can now take to the road and say the FM has made even a basic requirement like road repair prohibitive! The BJP demagogues will remind their audiences that it was Emperor Asoka , Sher Shah Suri and then Atalji , who built roads in India and now this government wants to tax even repair of these roads!