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CFI seeks service tax exemption on metro projects

Construction Federation of India (CFI) has sought service tax exemption on construction of metro and mono railways to achieve desired growth in the sector in a pre-Budget memorandum submitted to the Finance Ministry.
"CFI has demanded service tax exemption not only for construction of metro and mono railways but also on the toll revenues collected by the SPV Cos and their sub-contractors," the federation said in a statement.
The memorandum has pointed out that service tax exemption provided to Indian Railways for construction of railways should include metro and mono railways. "It should not be restricted to only contracts awarded for Indian Railways," it added. On the issue of toll collection by SPVs, CFI said concessionaires or their sub-contractors do not act toll collection agents of NHAI or state authorities, hence their collection of toll revenues should not be liable for service tax. As per the guidelines of NHAI or state authorities, successful bidder is required to form a separate Special Purpose Vehicle (SPV) for execution of the project during concession period.
It also sought exemption from service tax when the service is exported to neighboring countries like Nepal and Bhutan. Since this promotes export of service and cordial relationship with neighboring countries, it should be considered as ‘export of services’ and payment made by the service receiver in Indian currency should not be taxed, it added.

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