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Change in Definition of Governmental Authority
Notification No. 02/2014-ST dated January 30, 2014 (the ) has amended the definition of Governmental Authority as provided under (s) of Para 2 of the Mega Exemption Notification No. 25/2012-ST dated June 20, 2012 as under:
(s) “Governmental authority” means an authority or a board or any other body;
(i) set up by an Act of Parliament or aor;
(ii) established by Government, with 90% or moreby way of equity or control, to carry out any function entrusted to a under article 243W of the Constitution.
Earlier, the “Governmental authority” was defined as under:
“Governmental authority’’ means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipalityunder article 243W of the Constitution.
This change is effective from 30th January, 2014.
The issue is that can we interpret the amendment as retrospective in nature as the intention of the government right from the date when service tax was introduced was never to bring into the domain tax on work done for such entities. The construction work for such entities has always enjoyed exemption from 2004 till the commencement of negative list regime. Although we do expect that after the newly elected government comes into place the amendment may very well be made retrospective in nature even by bringing a separate notification for the same.
Despite all, the change is indeed a welcome one and shall give relief to several entities.
However one needs to be very careful before implementing the same.