Service Tax Applicable on
Shifting or Laying of Cables on Roads
[Service Tax Notification No. 123 dated 24th May
2010]
Subject: Applicability of service tax on laying of cables under or alongside roads and similar
activities – clarification regarding.
Disputes have arisen in some parts of the country regarding
applicability of service tax on certain activities such as shifting of overhead
cables to underground on account of renovation/widening of roads; laying of
electrical cables under or alongside roads/railway tracks; between
grids/sub-stations/transformers the distribution points of residential or
commercial complexes and such activities as electrification of railways,
installation of street-lights, traffic lights, flood-lights. This clarification
takes into account the taxability of different activities taking into account
the scope of all services (such as site formation/excavation/ earth moving
service, commercial or industrial construction services; erection,
commissioning or installation services; or works-contract service) that are
presently taxable as well as those which are covered under the Finance Act,
2010.
2. Scope of certain taxable services in brief;
(i)) ‘Commercial or industrial construction
services’, in brief, cover construction of and the completion, finishing,
repair, alteration, renovation, restoration or similar activities pertaining to
buildings, civil structures, pipelines or conduits. Therefore, only such
electrical works that are parts of (or which result in emergence of a fixture
of) buildings, civil structures, pipelines or conduits, are covered under the
definition of this taxable service. Further, such activities undertaken in
respect of roads, railways, transport terminals, bridges, tunnels and dams are
outside the scope of levy of service tax under this taxable service.
(ii) Under ‘Erection, commissioning or installation services’, the
activities relevant to the instant issue are (a) the erection, commissioning
and installation of plant, machinery, equipment or structures; and (b) the
installation of electrical and electronic devices, including wiring or fitting
there for. Thus, if an activity does not result in emergence of an erected,
installed and commissioned plant, machinery, equipment or structure or does not
result in installation of an electrical or electronic device (i.e. a machine or
equipment that uses electricity to perform some other function) the same is
outside the purview of this taxable service.
(iii) ‘Works Contract’ incorporates the inclusions and exclusions of the
aforementioned two taxable services (amongst others) and it is the nature of
the contract (i.e. a contract wherein the transfer of property in goods
involved is leviable to a tax as sale of goods)
rather than the nature of activities undertaken, that distinguishes it from the
previously stated taxable services. Thus, even in the case of ‘works contract’
if the nature of the activities is such that they are excluded from aforesaid
two services then they would generally remain excluded from this taxable
service as well.
(iv) ‘site formation and clearance, excavation, earthmoving and
demolition services’ are attracted only if the service providers provide these
services independently and not as part of a complete
work such as laying of cables under the road
3. The taxable status of various activities, on which disputes have
arisen
Based on the foregoing, the following would be the
tax status of some of the activities in respect of which disputes have arisen,-
S.No. |
Activity |
Status |
1. |
Shifting of overhead cables/wires for any reasons
such as widening/renovation of roads |
Not a taxable service under any clause of
sub-section (105) of section 65 of the Finance Act, 1994 |
2. |
Laying of cables under or alongside roads |
Not a taxable service under any clause of
sub-section (105) of section 65 of the Finance Act, 1994 |
3. |
Laying of electric cables between
grids/sub-stations/transformer stations en route |
Not a taxable service under any clause of
sub-section (105) of section 65 of the Finance Act, 1994 |
4. |
Installation of transformer/ sub-stations
undertaken independently |
Taxable service, namely Erection, commissioning
or installation services [section 65 (105] (zzd]. |
5. |
Laying of electric cables up to distribution point
of residential or commercial localities/complexes |
Not a taxable service under any clause of
sub-section (105) of section 65 of the Finance Act, 1994 |
6. |
Laying of electric cables beyond the distribution point of residential or
commercial localities/complexes. |
Taxable service, namely commercial or industrial
construction’ or ‘construction of complex’ service [section 65(105) (zzq)/(zzzh)],
as the case may be. |
7. |
Installation of street lights, traffic lights
flood lights, or other electrical and electronic appliances/devices or
providing electric connections to them |
Taxable service, namely Erection, commissioning
or installation services [section 65 (105] (zzd]. |
8. |
Railway electrification, electrification along
the railway track |
Not a taxable service under any clause of
sub-section (105) of section 65 of the Finance Act, 1994 |
4. The conclusions drawn above are essentially general in nature and
would have to be applied in an individual case depending upon its facts and
circumstances. The pending disputes /cases may be decided based on the
clarifications contained in this circular.
F.No.332/5/2010-TRU