Service tax on construction service
Knowledge Gainer
(Querist) 23 December 2013
This query is : Resolved
I have entered into agreement for development and construction of a building having 4 wings and 72 flats and 20 shop & offices with 25% of saleble area to be given to landowner as consideration.
Events
date of agreement with land owner 01.04.2006
date of starting construction 01.04.2007
date of advances received between 2007 to 2012
date of completion 31.03.2012
certain flats were sold after issuance of completion certificate.
Queries
From which date I am liable to pay service Tax?
Under which catagory? (i.e. construction of residential complex service or construction services other than residential complex, including commercial / industrial buildings or civil structures or works contract servicse)
Whether I am liable to pay services tax on flat sold after completion. (No advances received in respect of such flats till the date of sale)
Amritesh Mishra
(Expert) 24 December 2013
you are required to pay service tax as and when you receive amount from customers.
Service tax will not apply if builders sales ready flats.
R.K Nanda
(Expert) 24 December 2013
consult tax lawyer.
sindhu Mangat
(Expert) 24 December 2013
Service tax is liable to be paid on receipt basis till 01.04.2011. Therefore all amounts including advances are chargeable to tax on receipt basis.
From 01.04.2011, service tax is payable for construction services at such points when payments become payable as per contract or date of invoice.however advances remain taxable on receipt basis.
Services are classifiable under Works contract service with effect from 01.06.2007 at the rate of 2% till 01.03.08 and at rate of 4.12% thereafter till 01.07.2012. This facility can be availed if no service tax has been paid on this contract under categories of construction of commercial or industrial construction service.
If some amounts are received and alreay paid prior to 01.06.07 under construction of residential or commercial complex service, same may be continued.
No service tax is payable on flats sold after completion.
For landowner's share, there may be a liability depending on the nature of arrangement between landowner and builder.
Rajendra K Goyal
(Expert) 24 December 2013
Commercial query, consult your tax consultant.
T. Kalaiselvan, Advocate
(Expert) 24 December 2013
I think expert Singhu Mangat has given some valuable and informative opinions on the subject.
R.V.RAO
(Expert) 03 February 2014
good job by sindhu mangatji.
after builder obtains completion cert. and sells property , no serv.tax liability as advised above.
interesting in this connection is serv.tax notification dt. 26/12 dt 20/6/'12
effective 1 st july 2012 which says abatement of serv tax on res dwellings of 75% value. means serv tax@ 12.36%payable on 25% value of sale price . (if area is below 2000sq.ft and sale value below Rs 1 cr.)
if capital goods and input tax credit taken by builders is considered abatement could go up to 80%-taxing 20%for serv tax purpose.but builders are not known to pass this benefit to customers.
