BUDGET - BMR Advisors

legal right of possession and effective control, service tax wouldbe applicable.It appears that the above amendment addresses transactionssuch as those covered by the judgement of the Supreme Courtin the case of Rashtriya Ispat Nigam Limited. In this case thetransaction of supply of construction equipment by the projectowner to the contractor was held to not involve transfer of right touse the machinery in favour of contractors and therefore notliable to sales tax.Construction and civil works contractors not paying value addedtax or central sales tax on similar transactions on the basis of theabove judgement would now be required to pay service tax onthe same resulting in increased cost of the project.Service Tax on customized software and other ITservicesService tax has been imposed on information technologysoftware. Consequently, exclusion of information technologyservices from “business auxiliary services” has been deleted.Necessary amendments have also been carried out by includingservice relating to IT software under the taxable categories oftechnical testing and analysis, consulting engineering,maintenance or repair, technical inspection and certification.Consequently, the excise duty on packaged software is alsoproposed to be enhanced from 8 percent to 12 percent.Infrastructure sector projects which involve extensive use ofsophisticated software would be adversely impactedCentral Sales Tax (CST)Rate of CST reducedThe rate of CST is proposed to be reduced from 3 percent to2 percent. This is seen as a precursor to the GST regime to beintroduced from 2010.Reduced rate of 2 percent would be available only against issueof Form C. However, the benefit of Form C is available only tospecified category of infrastructure projects. In case of otherprojects where project owner is obligated to procure inputs andindiaBUDGET200861