Applicability of service tax provisions on business of sale/purchase of vacant plots
C..a......STUDENT
(Querist) 21 November 2013
This query is : Resolved
If an assessee is doing the business of buying and selling vacant plots, will service tax provisions?
Please reply.
C. SANJEEVA RAO
(Expert) 22 November 2013
Since the buying and selling of vacant plots does not come under the purview of the Service Tax provisions, as the transactions are selling of the immovable property, hence, the levy of service tax does not attract, however, if the assessees involving in the development of roads, culverts, lights etc. on such activities, the service tax has to be paid. As because, there is rendition of service to the customers.
Ms.Nirmala P.Rao
(Expert) 23 November 2013
The definition of service excludes transactions of sale and purchase, delivery or supply of any of above kind of “deemed sale”. The transactions listed above needs to be juxtaposed against some of the “Declared Services” in order to understand the conflict between the exclusion clause and such “Declared Services”. It has been clarified in the Education Guide that activities specified as declared list which are related to transactions that are deemed as sales
Please seer the decision of the Supreme Court in Bharat Sanchar Migam vs Union of India [2006(2) STR 161] would be a self explanatory guide to determine taxability of such transactions.
The following principles emerge from the said judgment for ascertaining the taxability of composite transactions :
The nature of a composite transaction, except in case of two exceptions carved out by the Constitution, would be determined by the element which determines the ‘dominant nature’ of the transaction.
If the dominant nature of such a transaction is sale of goods or immovable property, then such transaction would be treated as such.
If the dominant nature of such a transaction is provision of a service, then such transaction would be treated as a service and taxed as such, even if the transaction involves an element of sale of good
However, mere transfer of title to immovable property for consideration is a sale and doesn't attract service tax.
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C. SANJEEVA RAO
(Expert) 23 November 2013
Now, the dominant nature theory or aspect theory is no more existed with the judgment of L&T v. state of Karnakata reported in 63 VST delivered on 26.09.2013, so, the latest judgment on the subject may please be referred in the context of transfer of property and rendition of services.
Anirudh
(Expert) 23 November 2013
It is wrong to state that the dominant nature theory is not discarded altogether. It is only in the context of L&T it was stated that the dominant theory has no application.
C. SANJEEVA RAO
(Expert) 24 November 2013
Mr. Anirudh has rightly pointed out, but, in the instant query, the tax liability existed with the rendition of services to the customers for levelling etc. L&T judgment was rendered in respect of the transfer of property in goods involved in the execution of works either for residential flats or construction of building etc.
R.V.RAO
(Expert) 14 April 2014
in view of the lack of absolute clarity and increasing litigation as to what is taxable under service tax act and what is not,the govt.of india provided a negative list of 17 services .
besides the negative list, Government of India , Ministry of Finance (Department of Revenue)-service tax, vide Notification No. 25/2012-dated 20th June, 2012 has issued a comprehensive list of 39 services, exempted from service tax .
there fore it saves time and leads to clarity if we simply refer to the negative list of 17 services and 39 exempted services,to conclude, that any service not found in these 2 above lists is taxable.
