The finance ministry has said that services provided by way of erection of pandal or shamiana (tent for organizing ceremonies) would attract the levy of service tax.
After the introduction of Negative List of Services, where all services are taxable barring those specified in the List, the industry sought clarification on the levy of service tax on preparation of a place for organizing event or function by way of erection/laying of pandal and shamiana. The doubt raised was that this might be a transaction involving “transfer of right to use goods” and hence deemed sale.
The Central Board of Excise & Customs (CBEC), in a circular issued on Monday said activity by way of erection of pandal or shamiana is a declared service under Section 66E 8(f) of the Finance Act, 1994.
“Erection of Pandal or shamiana is a reasonably specialized job and is carried out by the supplier with the help of his own labour. The service is generally coupled with other services like supply of crockery, furniture, sound system, lighting arrangements, etc,” it said.
The CBEC further clarified that for a transaction to be regarded as “transfer of right to use goods”, the transfer has to be coupled with possession. Court rulings have upheld that when the effective control and possession is with the supplier, there is no transfer of right to use.
“It is a service of preparation of a place to hold a function or event. Effective possession and control over the pandal or shamiana remains with the service provider, even after the erection is complete and the specially made–up space for temporary use handed over to the customer. Accordingly services provided by way of erection of pandal or shamiana would attract the levy of service tax,” the circular said.
