Large projects with long gestation periods, heavy investments and some of the most involved risk modeling and financial structuring typify this sector. The entire sector sees multiple sub-contracts with suppliers of goods and services supporting master contracts executed with clients.

These coupled with the various exemptions for infrastructure projects of national importance, oilfield services rendered in designated and non-designated areas (from the point of view of taxability) etc. increase the complexity in tax positions taken by organizations.

In India the infrastructure sector relies heavily on project imports with attendant exemptions as specified under heading 9801 of the Customs Tariff. A large number of imports by oil exploration and oilfield service providing organizations come under the Essentiality Certificate (EC) issued by the Directorate of Hydrocarbons.

The services rendered by organizations in this sector include consulting engineer, dredging, site formation, earth moving, excavation, survey and map making, mining, technical testing and analysis etc. The input services include cargo handling, customs house agent services, maintenance and repair, telecommunication, and transportation among others.

Work is executed through project offices created specifically for this purpose. Often project offices become enduring establishments as organizations generate more and more business in the same geographies. Proliferation of project offices often results in complexities in accounting systems with tax departments finding difficulties in fully aligning centralized accounting systems with tax legislations of all countries. This leads to considerable manual work in otherwise automated systems resulting in compliance slippages. Often adhering to tax positions taken also becomes a challenge.