Construction of residential complex

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 March 2013 My builder who is engaged in the business of construction. Th builder has made the agreements with the residential property owners to built up there properties in four floor & given the three floors to the property owners & the remaining floor is to be sold in the open market. Whether service tax is applicable on these transaction & what amount of service tax is applicable on these transactions. The building is residential units.

Sumit Grover

Sumit Grover (Expert)
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19 March 2013 From the facts ,mentioned in your query, it appears that the land belongs to the property owner and the builder is simply providing the works contract service for them(by constructing the flats thereon).
Assuming that the materials(e.g. cement,iron/steel,etc.) are supplied by the builder himself.
Yes, it shall be chargeable to service tax.
And Rule 2A of Service tax(determination of value rules) amended by N/N 24/2012, the valuation be as follows:
Case 1:
If he charges material & labour charges separately, then VAT shall be payable on Material & Service tasx @12.36% shall be levied on labour charges.

Case 2:
He charges a consolidated invoice(without seggrgating), then he shall charge @ 4.944%(i.e. 40% of value X 12.36%) of the total amount charged....

Note:
However, the scenario will be different in case of JDA(Joint development agreement, in which both the parties share the profit).