Follow Us :

CA Keshav Garg, Chandigarh

1. Is Government a “person” under the Finance Act 1994 for levy of service tax?

Yes, as per the provisions of Section 65B (37), person includes “Government” for levy of service tax.

2. What is the meaning of “Government” under the Finance Act 1994?

As per section 65B (26A) with effect from 14th May 2015,”Government” would mean the Departments of Central Government, a State Government and its Department and a Union Territory and its department, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or rules made there under.

3. What is article 150 of the constitution of India?

According to article 150 of the constitution of India, the accounts of the union and of the states shall be kept in such form as the president of India may, on the advise of Comptroller and Auditor – General of India (CAG), prescribe.

Usually the entities whose books of accounts are auditable by CAG and the report of which is presented to the President of India and further laid in the parliament are covered under the article 150 of the constitution of India.

4. What is the parameter to judge whether an entity is covered by article 150 or not?

In order to judge whether an entity is covered by article 150, one should check these parameters:

1. Does the entity and the Government are separate in terms of functioning?

2. Is the entity a corporate/corporation which is separate from the Government?

3. Is it difficult to separate that entity from the government?

4. Is it covered by CAG Audit and the report is submitted to the President of India?

On analyzing the answers of the above said question, one can judge whether it will be covered under the purview of service tax or not.

5. Broadly what types of Government Departments are chargeable to service tax?

As per the definition mentioned in point 2 broadly three categories of government entities are covered under the service tax law:

a. Departments of Central Government

b. State Government & its departments

c. Union Territory and its Departments

Excluding the entities which are created by the statute like ICAI, ICSI etc. or any entity which is created by virtue of a statute like Limited Companies, Corporations etc. are also kept out of the definition of Government. All other body corporate and entities like Housing Board, Development Authorities etc. do not constitute government under the Finance Act 1994.

Only those departments/entities which carry out their function in the name and by order of the President of India or the Governor of a State are covered under the definition of the government.

6. Kindly name a few entities which are covered under the “government”?

a. State Government Testing Department

b. Central Industrial Security Force

c. Police Department

d. Departments of Various Ministries

7. Kindly name a few entities which are NOT covered under the “government”?

a. Bharat Sanchar Nigam Limited (BSNL)

b. Airports Authority of India Limited

c. Punjab State Power Corporation Limited.

d. Haryana Urban Development Authority

e. Securities and Exchange Bureau of India

8. Are there any exemptions from service tax when service is provided to the government?

Yes, by virtue of S.No. 12 of Mega Exemption Notification 25/2012 dated 20.06.2012 – Services Provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of :

(a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

(b) canal, dam or other irrigation works;

(c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

9. Is there any reverse Charge mechanism involved in case of services provided to the government?

No, in case of services provided to Government, there is no mechanism of reverse charge of service tax involved as per the law.

10. Since Definition of Government was introduced on 14th May 2015, What about the services provided prior to 14.05.2015?

Prior to 14.05.2015 the law had adopted the definition of “government” mentioned in the General Clause Act 1897 which included both the Central & State Government and their departments.

11. Has Finance Bill 2016, brought any amendment with regards to services provided to government?

Yes, the Finance Bill 2016 has Introduced Section 102 which has exempted the service provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of :

a. Civil Structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession;

b. A structure meant per-dominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or

c. A residential complex predominantly meant for self-use or the use of their employees or other persons specified.

(Author can be reached at +91 9888-090-008 or on


Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.


  1. Riverside Tours n Travels says:

    construction services to military departments and transportation of military canteen items lived to service tax. Is it necessary for the service provider pay the service tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
April 2024