Taxation of Reparing of Roads - a new twist in the tale

This ongoing saga of taxation on repairs and maintenance of roads has now taken a new twist – which in my understanding is regressive and should be abhorred. The issue which is and was crystal clear – in other words the Act clearly says that repairs of roads and other specified infrastructural facilities is not taxable at all still the government went ahead and made the same taxable by issuing an illegal circular(no. 110/2009 dt. 23.02.2009). Now the government has tried to back track and has issued an exemption notification (no. 24/2009 dt. 27.07.2009).

It is an accepted legal maxim that – what is not taxable by the Act cannot be taxed by a circular – so I guess this notification creates a farcical situation whereby it says something whereas it means something else. Let me explain.

1. It says that repairing of roads service will not be taxable w.e.f. 27.07.2009 – which if accepted would mean that the same activity was taxable from 16.06.2005 to 26.07.2009 – this in itself is ridiculous.
2. Secondly this notification exempts only roads from the purview – what about Dams, Transport terminals airports etc.

Hence in my view this notification is also as was the earlier circular void ab initio and will be struck down by tribunals in the foreseeable future for reasons discussed above.

Nitesh Jain
www.niteshjain.co.in
Email - nitesh@niteshjain.co.in