Service tax is payable to the government on the 5th of every month, and companies carrying out consultancy services are also liable to pay the taxes. However, implementing the Goods and Services Tax or GST, the service tax on project management consultancy has changed. Here, the taxation for consultancy services depends on the type of project being done and the service’s nature. In addition, scrutiny of the individual contracts is also essential before implementing CGST. Some of the factors that you need to understand about service tax on project management consultancy are as follows:
Exemption from payment of taxes
In some instances, project management consultancy services can be exempt from payment of service tax if it is categorized as ‘pure service.’ For example, suppose a company provides consultancy services to panchayat to develop a rural road, and it is purely an engineering service. You will be exempted from paying CGST to the government. But it should fall under Central Goods and Service Tax and SI. No. 3, Chapter 99.
Understanding CGST exemptions
In most cases, consultancy services are exempted from paying taxes associated with rural development. If your company benefits the rural economy and your company’s consultancy services results in long term rural development, you can ask for exemption of payment of taxes. But the government will accept the exemption only after evaluating the project reports. Therefore, project management should involve supervision, evaluation, and project execution.
Expectations from the consultancy service
When the government grants an exemption of the service tax, it becomes essential to evaluate the expectations of the government regarding the project. Your consultancy service will include scrutinizing each package relating to the project, preparing the construction supervision manual, and providing the final quality check. Each package and all phases of the project have to undergo your supervision.
Evaluating all aspects of tax exemption.
When you opt for a consultancy service that is eligible for a service tax exemption, it is essential to ensure that you have evaluated all aspects of the services that you need to provide. For example, you will have to monitor the construction method and ensure that the environmental safeguards are maintained, and resettlement plans are implemented.
Rural development can be pretty complex, and project management consultancy service regarding rural economic development requires expertise. However, due to the nature of the service provided, the government often exempts it from the payment of service tax.