Service tax on Society repairs

tell him to give you certificate of total deduction of service tax in requisite format.

as you can get refund of same.

2A. Determination of value of services involved in the execution of a works contract:

(1)       Subject to the provisions of section 67, the value of taxable service in relation to services involved in the execution of a works contract (hereinafter referred to as works contract service), referred to in sub-clause (zzzza) of clause (105) of section 65 of the Act, shall be determined by the service provider in the following manner:-  

(i)        Value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract.

             Explanation.- For the purposes of this rule,-  

(a)       gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract;

 

(b)       value of works contract service shall include,-

(i) labour charges for execution of the works;

(ii) amount paid to a sub-contractor for labour and services;

(iii) charges for planning, designing and architect’s fees;

(iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract;

(v) cost of consumables such as water, electricity, fuel, used in the execution of the works contract;

(vi) cost of establishment of the contractor relatable to supply of labour and services;

(vii) other similar expenses relatable to supply of labour and services; and

(viii) profit earned by the service provider relatable to supply of labour and services;

(ii)      Where Value Added Tax or sales tax, as the case may be, has been paid on the actual value of transfer of property in goods involved in the execution of the works contract, then such value adopted for the purposes of payment of Value Added Tax or sales tax, as the case may be, shall be taken as the value of transfer of property in goods involved in the execution of the said works contract for determining the value of works contract service under clause (i).

 

So, if the contractor provides you bill for material i.e. transfer of property in goods, VAT shall be chargeable on the same which is substantial. It would be better you pay service tax on the gross bill treating the material as consumables and avail composition scheme on works contract by which the service tax on gross bill shall be only 4% in comparision to 10% chargeable otherwise.

 

The society can avail credit for Service tax paid against service tax chargeable from mebers contribution.

Thank you sir for such a detailed explanation. 

Can you please explain what is "Service tax chargeable from members contribution".

How do we get refund/credit of Service tax?

Dear Audry

As per section 65(105)(zzze) of Finance Act, 1994 (Don't get confused there is no seperate Service Tax and authority to levt Service Tax emanates from chapter V of Finance Act 1994), service tax is leviable on services provided to its members, by any club or association in relation to provision of services, facilities or advantages for a subscripttion or any other amount;

Thus the service charges recovered by residential housing socities from its residents (excluding municipal tax) are covered under service tax. But don't worry, exemptions have been provided to let most of the housing societies out of the service tax net. I am providing the respective notification and clarification on the same below:

Notification New Delhi, the 1st March, 2007

No. 8/2007-Service Tax 10 Phalguna, 1928 (Saka)

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services, specified in sub-clause (zzze) of clause (105) of section 65 of the said Finance Act, provided or to be provided, by a resident welfare association where the sole criterion for its membership is the residential status of a person in a residential complex or locality, to its members, from the whole of the service tax leviable thereon under section 66 of the said Finance Act, subject to the condition that the total consideration received from an individual member by the said association for providing the said services does not exceed three thousand rupees per month.

[F.No. 334/1/2007-TRU]

(R. Sriram)

Deputy Secretary to the Government of India.

F.No.137/68/2007-CX.4

Government of India

Ministry of Finance

Department of Revenue

Tax Research Unit

*****

New Delhi, the 8^th May, 2007.

Subject: Exemption to resident welfare association vide notification No.8/2007-Service Tax, dated 01.03.2007 – Regarding.

            A number of representations have been received from Co-operative Group Housing Societies who are providing taxable services under section 65(105)(zzze) seeking whether a resident welfare association registered as a co-operative society with the Registrar of Co-operative Societies  is entitled for the benefit of service tax exemption under notification No.8/2007-Service Tax, dated 01.03.2007 or not.

2.         A resident welfare association, even if it is registered as a co-operative society with Registrar of Co-operative Societies, is eligible to avail exemption from levy of service tax vide notification No.8/2007-Service Tax, dated 01.03.2007 provided the following conditions are satisfied, namely:-

(1)      The exemption is available for the services specified under section 65(105)(zzze) of the Finance Act, 1994 and provided or to be provided by the association to its members.

(2)      The sole criterion for membership of the resident welfare association is the residential status of a person in a residential complex or locality i.e., membership of the association is restricted only to the residents of the complex or locality.

(3)      The value of total consideration received from an individual member by the association for providing the services should not exceed Rs.3,000/- per month.

3.         This issues with the approval of Member (Budget).

Yours faithfully,

(G.G. Pai)

Under Secretary to the Government of India

There is no provision for refund on service tax paid on services availed. However credit for the same can be taken against the service tax chargeable on output service.

For example if your society pays Rs 100 as service tax on bill raised by housekeeping agency and in turn charge Rs 120 as service tax on society bills raised on members, in such case though the society collects Rs 120 as service tax from members, it will deposit only Rs 20 to the Government and avail credit for Rs 100 already paid as service tax on input service (Housekeeping)

However, if no service tax is charged on members, then society cannot avail any credit for service tax paid.

Dear Vineet

Thank you. We do not charge Service tax on Society bills since ours is an old Society and our maintenance charges are less than Rs. 1000 per member. 

I guess we will have to pay Service tax on our repairs bill.

Regards

Notification No.8/2007-Service Tax, dated 01.03.2007 states that service tax is not applicable to a resident welfare association if total consideration received from an individual member by the said association for providing the said services does not exceed three thousand rupees per month. Now consider a case:

Association has different sizes of flats. Monthly maintenance charges from some flat owners are less than Rs. 3000/- per month while some flat owners pay more than Rs. 3000/- per month. In such a case, whether service tax is applicable only to those members who pay more than 3000/- or it will become applicable to all and this exemption benefit will not be available. 

Case No. 2:  One Flat owner paid a maintenance charge of Rs. 2800/-in August 2010. In the same month, he again paid Rs. 500/- towards festival fund subscripttion. Whether service tax will be applicable to him as now his total contribution for the month exceeds Rs. 3000/- ?