Service tax on construction services

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 February 2012 My Client has started construction of residential flats in 2006-07 and entered into an agreement of sale with potential buyers. The construction of the residential complex was completed on or before 01-07-2010 as per Architect certificate but the deliver and possession of the flats were given to buyers upon them making full payment/installments.

Is my client liable for service tax with effect from 01-07-200 as construction services ? if yes why

Guest

Guest (Expert)

28 February 2012 When payment is received from the buyer for construction services after receipt of completion certificate then service tax is not be charged.

Querist : Anonymous

Querist : Anonymous (Querist)

29 February 2012 Thanks Neha, However Flat Buyers are paying consideration in installment which may sometime be after 01-07-2010 though the flat purchase agreement was signed on or before 01-07-2010.

I think Construction Services which are for agreements after 01-07-2010 only applicable..pls comment

Upgrade to CAclubindia Pro. Subscribe Now!

Guest

Guest (Expert)

29 February 2012 Service tax will not apply only when a builder sales a ready flat or shop or industrial unit after Building completion certificate is obtained from local authority (like Municipal Corporation, Municipality, Gram Panchayat etc.) and entire consideration is obtained only after building completion certificate is obtained. In all other cases, the builder will be liable to pay the service tax. It is well known that in most of the cases, builder constructs buildings mainly on raising funds from prospective buyers. Further, even after building is completed and ready for occupation, there is delay in obtaining building completion certificate from the authorities.

Builder/developer will not be liable only if entire transaction (including receipt of money) takes place after obtaining ‘completion certificate’ from municipal or other competent authority.

Date of booking is not relevant. Date of provision of service is relevant as provision of service is the taxable event. Hence, if construction service is provided after 1-7-2010, service tax will be payable. service tax will apply in respect of services provided or to be provided on or after 1-7-2010. Receipt of payment or advance is not relevant for determining tax liability. Thus, a builder/developer is not liable to pay service tax in respect of services provided upto 1-7-2010. Such bifurcation is possible only if the builder/developer keeps proper accounts and records.

Querist : Anonymous

Querist : Anonymous (Querist)

29 February 2012 Thank you Neha.