We have entered into an agreement with a client for procuring logistics services. Though the logistics company would be providing the services directly to the customer, it would raise an invoice on us. In turn, we would raise an invoice on the customer (to recover the amount charged by the logistics company without any mark-up) and charge a commission from the customer. Will the transaction be subject to service tax?

The services rendered by you are in the nature of procurement of the logistics services, which should be taxed under the category of business auxiliary services (any service in relation to procurement of goods or services, which are inputs for the client). Therefore, the commission charged by you from the customer would be liable to service tax under this service category. As regards cost reimbursement, if you can transact as a ?pure agent? of the customer in procuring the services from the logistics company, no service tax would be applicable on such reimbursement (there are several conditions to be satisfied to qualify as a ?pure agent?). However, in case the conditions of pure agency are not satisfied, service tax would be applicable even on the charges for reimbursement of the logistics costs.

We are a construction company and have been awarded a contract for construction of canals in north India. We wish to understand whether service tax is applicable on such services rendered by us.

The relevant service category that you should examine is commercial or industrial construction service, which includes within its ambit the construction of a pipeline or conduit. However, as per the definition of commercial or industrial construction service, it appears that the services would attract service tax if the work is used, occupied or engaged for the furtherance of commerce or industry. Construction services provided in relation to roads, airports, railways, transport terminals, bridges, tunnels and dams are excluded from the purview of this service category. A recent circular by the Central Board of Excise & Customs stipulates that the canal systems built by the government or under government projects is not for commercial activity, therefore, the canal system built by the government will not be chargeable to service tax. However, if the canal system is built by private agencies and is developed as a revenue generating measure, then such construction should be charged to service tax.

We understand that GST is to be implemented in April 2010 and that there would be two GSTs, central and state. Would the central and state GST be similar to the current VAT and CST?

The proposed GST would be a dual GST, that is, transaction of supply of goods or services to attract both central GST and state GST. Therefore, every transaction of sale (whether inter-state or local) would attract both these taxes in tandem. The central GST would be collected by the Central government whereas the state GST would be collected by the respective state governments. Therefore, the application of the central and state GST would be different from the current application of the state VAT (to local sales) and CST (to inter-state sales).

We are setting up a coaching institute in various cities and understand that we need to have a service tax registration. Since we operate in various cities, we wanted to take a centralised registration in Delhi (where our head office is situated). We also understand that in order to obtain centralised registration, an affidavit is required to be submitted to the authorities. Is it correct?

Yes, you are correct. The service tax commissioner in Delhi has recently issued a trade notice requiring applicants for centralised registration to submit a notarised affidavit of the company secretary/MD/CEO or partner or proprietor, certifying that the assessee is keeping centralised accounting or centralised billing system at the premises for which centralised registration is sought and the list of addresses of the various premises.

Respondents are senior professionals at Ernst & Young. The replies do not constitute professional advice. Neither EY nor FE are liable for any action taken on the basis of these replies