Service Tax on Construction, Service Tax

[CA BALRAM PANDEY]

Dear Professional Colleagues

Please guide me on the following issue:-

A builder/developer is constructing building and starting booking of flats before completion of construction, the activities flows in following manner:

01-01-2010  Date of construction started.

01-01-2011 Date of First Booking of Flat

Stage of completion        Date of construction         date of realisation

4th Floor                        01-04-2012                      31-05-2012 (50 percent of Flat Value)

10th Floor                       01-04-2014                     31-05-2014 (90 percent of Flat Value)

Possession by

Deed of conveyance        01-10-2014                       01-10-2014 (100 percent of Flat Value)

Based on the above please guide me that, what will be the point of taxation for each construction stage, as it is a continuous supply contract. 

  Thanks in advance

Balram Pandey

Posts / Replies

[Brijesh Verma]

POT shall early of :

1. Invoicing

2. Completion (where completion in case of construction is every such event where customer is obliged to pay)

3. Payment

[YASHAVANTH RENUKA]

Dear Pandey,

The Following method to be used as per Accounting Std. ( AS) 7 (2002).

You can book revenue on accrual basis in case of Income Tax.

You can book revenue on  completion basis for Service Tax as per POT Rules.                                      

                                                                          Year 1 Year 2 Year 3

Initial amount of revenue agreed in contract              9,000 9,000 9,000
Variation                                                              - -    200    200
Total contract revenue                                          9,000 9,200 9,200
Contract costs incurred up to the reporting date      2,093 6,168 8,200
Contract costs to complete                                   5,957 2,032 - -
Total estimated contract costs                             8,050 8,200 8,200
Estimated Profit                                                   950 1,000 1,000
Stage of completion                                              26 percent 74 percent 100 percent