Service tax on , Service Tax

[hubert fernandes]

the finance bill has extended the scope of prevailing service "complex construction" by introducing an explaination that unless the entire payment is made by the prospective buyer to the developer/builder the activity of construction would be deemed to be a taxable service and charged accordingly. If in a ongoing project under construction (pending occupancy) a customer has booked an apartement under an registered agrt for sale and has paid a part consideration of say 3 lac as against the total sale price of 10 lac. whether the 3 lac paid would be exemped and 7 lac would be subjected to service tax. however the board Circular No. 108/02/2009–ST dt 29.01.209 which states that"It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of ‘self-service’ and consequently would not attract service tax" can we avail the benefit of the above circular and would the enite 10 lac be exempted ? and only sale agrt ented post the expalination would be subjected to service tax.

Posts / Replies

[Rama Krishana]

I bag to differ with your interpretation of the circular. Any project which are in process and the builder or developer is yet to obtain the completion certificate from the competent authority, can not be said as completed project. Therefore a project which is not complete at the time of introduction of service tax on such contract, can not be said as partly exempted prior to the date of levy. The entry introduced by way of an explanation is going to initiate long battle and confusions in respect of projects which are already in process. Therefore, in my view, all the builders / developers whose project is near to completion should approach the competent authority for issuing a completion certificate before the possible date of notification regarding new services. On the other side, all the builders / developers must approach the central government to issue a clarification or exemption notification that service tax shall not be collected on amount collected before the date of notification.