Reg service tax on apartment
Manohar
(Querist) 11 April 2014
This query is : Resolved
We (8 members) have purchased a land in Bangalore and given it for Joint development in August 2012. The agreement is such that each one of us gets one aptmt and builder gets his share of aptmts. Now the aptmt is finished and ready for possession.
Now the builder is asking that each one of has to pay service tax of 3.1% on the current value of his own aptmt. Is this really something owner should pay? If so, what is the percentage? As we haven't paid anything to builder, does this service tax applicable in my case?
Devajyoti Barman
(Expert) 11 April 2014
Yes in case of flat developed by a builder, the purchaser will have to pay Service tax.
But here you are joint land owner, so you are not liable.
Manohar
(Querist) 11 April 2014
Thanks Devajyoti for response.
But in my case I haven't purchased anything from builder right. That is there is no money transaction happened between me and builder.
So should I need pay service tax in this case??
R.V.RAO
(Expert) 12 April 2014
flats sold by a builder, after obtaining completion certificate(occupancy certificate) will not attract service tax.
the reason is there is only sale of a completed flat but no service .
sale attracts vat but not serv.tax.
in case your builder has not yet obtained completion cert. but sold the flat to you(under construction) ,then you are liable for serv.tax @12.36% of 25%of flat sale value (as per your regd.sale deed),payable by you at the time of registration of under construction flat.
vide serv.tax notification no 26/12 wef 01/7/12, there is an abatement of 75% on value liable for serv tax.
Therefore you are liable to pay serv.tax @12.36% ( only on 25% of value of your sale deed price of the flat (after 75%abatement)
further pl. note builders take cenvat credit on input serv.
So,depending on your negotiating skills,a further 5% abatement is possible if you/ all the affected persons like you in your apartment complex can negotiate with builder, for addl. abatement of another 5%.
so you get 80%abatement and serv.tax payable on 20% of value of your flat(as per regd.deed value).
service tax abatement of 75%is provided by above serv.tax notification in respect of flats with carpet area of less than 2000 sq.ft and also of value of less than
Rs one crore.
this is current law on service tax and it is immaterial whether you made part/full payment to builder so far or not.
T. Kalaiselvan, Advocate
(Expert) 13 April 2014
Mr. Rao, the author has not bought the property from the builder and there was no money transaction between them, his query is very clear that he has not purchased the property from the builder and in the reverse, the builder has developed the author's own land into apartments and the builder gets his share of apartment, why is he insisting on the service tax when there was no money transaction happened between them ?
R.V.RAO
(Expert) 13 April 2014
i consider all the above arguments of LCI experts and wish to say the service tax liability is there in case of joint development ,the details of which are as follows:
the Central of Excise & Customs (CBEC) has issued Circular No. 151/2/2012-ST dated 10.2.2012 (Circular) clarifying the service tax applicability on the various operating models prevalent in the construction industry. The contents of this important Circular are discussed below.
The first such one relates to the tripartite business model wherein the landowner transfers the development rights over the plot to the builder and the builder develops the property through the contractor for onward allotment to the landowner and other buyers. The Circular clarifies that the services provided by the builder prior to the date of insertion of the above Explanation on 1st July 2010 will not be subject to service tax, in the light of an earlier Circular on the subject dated 29.1.2009, which was the subject matter of a previous article in this column. However, for the subsequent period the services provided by the builder to both the landowner and other buyers will be subject to service tax on a value to be ascertained in accordance with the relevant valuation rules under service tax law. Specific reference has been made to these rules because the transfer of development rights by the landowner to the builder, which is treated in the Circular as consideration for the transfer of the built up property by the builder to the landowner, is evidently not in monetary terms and hence its value needs to be determined appropriately.
Under the new dispensation of negative list,in service tax act ,amended in 2012 fin.act,ALL SERVICES except the following 17 listed services are now taxable.
Negative List of Services
The negative list shall comprise of the following
services, namely:
(a) services by Government or a local authority
excluding the following services to the extent
they are not covered elsewhere—
(i) services by the Department of Posts by
way of speed post, express parcel post, life
insurance and agency services provided to a
person other than Government;
(ii) services in relation to an aircraft or a vessel,
inside or outside the precincts of a port or
an airport;
(iii) transport of goods or passengers; or
(iv) support services, other than the services
covered under clauses (i) to (iii) above,
provided to business entities;
(b) services by the Reserve Bank of India;
(c) services by a foreign diplomatic mission located
in India;
(d) services relating to agriculture or agricultural
produce by way of—
(i) agricultural operations directly related to
production of any agricultural produce
including cultivation, harvesting, threshing,
plant protection or testing;
(ii) supply of farm labour;
(iii) processes carried out at an agricultural
farm including tending, pruning, cutting,
harvesting, drying, cleaning, trimming, sun
drying, fumigating, curing, sorting, grading,
cooling or bulk packaging and such like
operations which do not alter the essential
characteristics of agricultural produce but
make it only marketable for the primary
market;
(iv) renting or leasing of agro machinery or
vacant land with or without a structure
incidental to its use;
(v) loading, unloading, packing, storage or
warehousing of agricultural produce;
(vi) agricultural extension services;
(vii) services by any Agricultural Produce
Marketing Committee or Board or services
provided by a commission agent for sale or
purchase of agricultural produce;
(e) trading of goods;
(f) any process amounting to manufacture or
production of goods;
(g) selling of space or time slots for advertisements
other than advertisements broadcast by radio
or television;
(h) service by way of access to a road or a bridge
on payment of toll charges;
(i) betting, gambling or lottery;
(j) admission to entertainment events or access
to amusement facilities;
(k) transmission or distribution of electricity by an
electricity transmission or distribution utility;
(l) services by way of—
(i) pre-school education and education up to
higher secondary school or equivalent;
(ii) education as a part of a curriculum for
obtaining a qualification recognised by any
law for the time being in force;
(iii) education as a part of an approved
vocational education course;
(m) services by way of renting of residential
dwelling for use as residence;
(n) services by way of—
(i) extending deposits, loans or advances in so
far as the consideration is represented by
way of interest or discount;
(ii) inter se sale or purchase of foreign currency
amongst banks or authorised dealers of
foreign exchange or amongst banks and
such dealers;
(o) service of transportation of passengers, with or
without accompanied belongings, by—
(i) a stage carriage;
(ii) railways in a class other than—
(A) first class; or
(B) an air conditioned coach;
(iii) metro, monorail or tramway;
(iv) inland waterways; 146
(v) public transport, other than predominantly
for tourism purpose, in a vessel, between
places located in India; and
(vi) metered cabs, radio taxis or auto rickshaws;
(p) services by way of transportation of goods—
(i) by road except the services of—
(A) a goods transportation agency; or
(B) a courier agency;
(ii) by an aircraft or a vessel from a place
outside India upto the customs station of
clearance in India; or
(iii) by inland waterways;
(q) funeral, burial, crematorium or mortuary
services including transportation of the
deceased.
source:
http://www.deloitte.com/assets/Dcom-_Service 20Tax 20in 20India.pdf
