CONSULTING ENGINEERS

 

Date of Introduction: 07.07.1997 vide Notification No.23/97-ST dt.02.07.1997.

 

Definition:

Consulting Engineer means any professionally qualified engineer or engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering.

(Section 65(18) of Finance Act, 1994 as amended)

 

Consulting engineers shall include self-employed, professionally qualified engineers, who may or may not have employed others to assist him or it could be an engineering firm­whether organized as a sole proprietorship, partnership, a private or a public Ltd. Company.

   (Ministry’s F.No.B-43/5/97 TRU dt.02.07.1997)

 

Similarly, it will also include Trust and Societies & Government Organizations. (Service Tax Through Questions & Answers 2000-01) 

Taxable events & scope of service:

 

The taxable service means any service provided to a client, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering.

(Section 65(72)(g) of Finance Act, 1994 as amended)

 

The services, which attract the levy, include all the services which are rendered in the capacity of a professional person and specifically include the services pertaining to structural engineering works, civil/mechanical/electrical engineering works or relating to construction management. All services rendered within the above scope of the term engineering attract Service Tax provided they are rendered in the capacity of a consulting engineer. The scope of the services of a consultant may include any one or more of the following categories:

 

(i)

Feasibility study

(ii)

Pre-design services/project report

(iii)

Basic design engineering

(iv)

Detailed design engineering

(v)

Procurement

(vi)

Construction supervision and project management

(vii)

Supervision of commissioning and initial operation

(viii)

Manpower planning and training

(ix)

Post-operation and management

(x)

Trouble shooting and technical services, including establishing systems and procedures for an existing plant. The list is only illustrative.

 

In the case of the services rendered by the sub-consultant/associate consultant to the prime consultant, the levy of Service Tax, does not fall on the sub-consultant but only on the prime or main consulting engineer who raises a bill on his client (which would include the charge for services by the sub-consultant).

(Ministry’s F.No.B-43/5/97 TRU dt.02.07.1997)

 

The service provided by consulting engineer to Central Government/State Government Organizations or Public Sector undertaking is also leviable to Service Tax.

(Ministry’s F.No.345/7/99- TRU dt.07.06.1999)

 

If the firms are manufacturing tailor made items and are also engaged in drawing, designing, erection & commissioning of the machinery at site, all the essential ingredients of ‘Consulting Engineers’ i.e. advice, consultancy & technical assistance are present and therefore, they would be liable for payment of Service Tax.

 

Service Tax would be payable in the event of consulting engineers are sent on deputation/secondment to other firms.

 

Services rendered by Agency authorized by Director of Explosive, Nagpur to conduct inspection and certify roadworthiness of LPG Tanker attract Service Tax as Consulting Engineer.

 

The service provided by Engineer Valuers regarding valuation of immovable property and plant & machinery would fall within the purview of Consulting Engineers and is liable for payment of Service Tax.

 

Value of Taxable Service:

The value of taxable service shall be the gross amount charged by consulting engineer for advice, consultancy or technical assistance in any manner in one or more disciplines of engineering. If payment from the client is received in different stages, Service Tax is required to be paid on payments received at each stage from the client. If there is any modification in payment, the same need to be adjusted when final payment is received. (Section 67 of Finance Act, 1994 as amended)

 

In the case of amount received in convertible foreign exchange is leviable to Service Tax, the rate of conversion of foreign currency into Indian Rupees is the rate prevailing on the date on which payment is made by service receiver.

 

Exemption and Exclusion:

1. Taxable service provided to any person by a Consulting Engineer in relation to Computer Software, is exempted from the whole of Service Tax leviable thereon vide notification no. 4/99 ST dtd.28/2/99.

 

2. The deduction from the value for levy of Service Tax would be allowed for the amount incurred by the consulting engineer on behalf of the client towards expenses, which are reimbursed on actual basis and in case, where the client is billed on a lump sum basis, any deduction from the same on account of reimbursable expenses for the purpose of determining the value of taxable service are permitted on the basis of documentary evidence adduced by the consulting engineer.

                        (Ministry’s F.No.B-11/3/98 TRU dt.07.10.1998)

 

3. The service provided by qualified engineers in the area of Insurance survey and loss assessment would not be leviable to Service Tax under the category of Consulting Engineer.

 

(Ministry’s F.No.345/5/2001 TRU dt.30.04.2001)

 

Case Law:

Hon’ble Madras High Court in the case of V.Shanmughavel v. Commissioner of Central Excise, Chennai-II [2001(131) E.L.T. 14 (Mad)] has held that registered valuers of Plant & Machinery and immovable property would fall within the ambit of Consulting Engineers, that Service Tax is not a tax on profession and hence not beyond the legislative competence of Parliament and that the tax on Consulting Engineers is not violative of Article 14 of the Constitution.

 

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