The Hindu Business Line : CBEC clarifies on service tax on plant erection, commissioning

THE Central Board of Excise and Customs (CBEC) has made it clear that the charges for erection, commissioning and installation services are not covered under the category of consulting engineer services for service tax purposes.

This stance overrides the position articulated by the revenue department in December 2002, wherein it was clarified that the work of erection and commissioning is in the nature of services provided by a consulting engineer and hence taxable under service tax.

Commissioning or installation services were brought under the service tax net through the Finance Act 2003. Service tax on such services were applicable from July 1,2003.

The revenue department has now in consultation with the Law Ministry clarified that commissioning or installation service would be separately taxable for service tax under the relevant category and not chargeable under consulting engineer services.

Informed sources said that the latest clarification made by the department would also imply that charges for erection of plant would not attract service tax.

It would also imply that the assesses who paid service tax on commissioning or installation services under the category of consulting engineering services, prior to July 1, 2003, may be eligible for a refund of tax from the department.

The Finance Ministry has budgeted Rs 479 crore as service tax receipts from consulting engineer services for 2004-05.