The ‘burden of bricks’ gets little lighter…
Imposition of service tax on construction and sale of residential property has been a matter of concern for long. Relying on various court decisions, the Central Board of Excise and Customs (CBEC) has periodically clarified issues and moving along same lines it has recently issued a Circular elucidating its views on the subject.
Doubts were a plenty regarding applicability of service tax in cases where the developer / builder / promoter enters into an agreement, with the ultimate owner, for selling a dwelling unit, in a residential complex at any stage of construction (or even prior to that) and who makes construction linked payment. It has been unambiguously stated that any service provided by a 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.
Further, if the ultimate owner enters into a contract for construction of a residential complex with a promoter / builder / developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, there also such activity would not be subjected to service tax. However, in both these situations, if services of any person e.g. contractor, designer or similar service-provider are availed, then such a person would be liable to pay service tax.
The Circular concludes by stating that any decision of the Advance Ruling Authority which is contrary to the foregoing view, could only be implicitly based on different facts and hence applicable to that case only.
Clearly the clarification has helped in removing confusion. Further more due relief from the service tax would become available to the construction industry as well as the buyers of immovable property.
2 comments:
I have registered my property in 3rd Nov 2007 when it was under construction.
Today the property is ready for posession.
currently the builder is demanding 2% towards newly introduced service tax.
Is this really true that service tax is applicable ?
is this payable by the flat owners like me or by the builder
Pls clarify
Thanks
Circular No. 108/02/2009 – ST of Central Board of Excise and Customs, dated 29th January 2009 says that if the ultimate owner enters into a contract for construction of a residential complex with a promoter / builder / developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to service tax, because this case would fall under the exclusion provided in the definition of ‘residential complex’. However, if services of any person like contractor, designer or a similar service provider are received, then such a person would be liable to pay service tax. It seems, prima-facie, that Service Tax may be applicable in your case. However, it is advisable to have a detailed study of your contract/arrangement with the contractor before taking a final view.
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