17 April 2013
HOW TO BRING A DEMARCATION BETWEEN: 1.CONSTRUCTION SERVICES (IN RELATIION TO CONSTRUCTION OF RESIDENTIAL COMPLEXES) U/S 66E(b)
2.WORKS CONTRACT SERVICES(IN RELATION TO CONSTRUCTION OF RESIDENTIAL COMPLEXES) U/S66E(h)
PLEASE HELP ME IN THIS REGARD
WHAT I UNDERSTOOD: WHERE THE GOODS INVOLVED IN CARRYING OUT THE CONSTRUCTION SERVICES ARE SUBJECTED TO VAT OR SALES TAX THEN SUCH SERVICE SHALL BE TAXED UNDER WORKS CONTRACT. NOW MY DOUBT IS IN ALMOST ALL THE STATES THE GOODS INVOLVED IN CONSTRUCTION SERVICES ARE SUBJECTED TO SERVICE TAX
PLEASE HELP ME IN THIS REGARD I AM FACING SO MUCH OF PROBLEMS WITH THE CONSTRUCTION OF RESIDENTIAL COMPLEXES
17 April 2013
Sowmya, The same thing used to confuse me a lot even before and at times after clearing idt. this is what i understood and helped me, though you may share your other doubt also after reading this. 66E(b) is for the situation when a person purchased land, constructed flats on it and selling it to buyers. Questuion(if you make a house on your land then there should not be any service tax even if you sale this later, as you were providing service to yourself, then why tax here) Ans.(Because here it is written that tax is in case when you take money before its completion. this means now you are providing services to others as you are in contract with sale of land too, and then construction on that comes under this situation)
Now 66E(h) i.e; work contract: in work contract we provide material plus services. so to differentiate these above two services remember that when a land is transfer along with the flat(under complex) that comes in 66E(b) and when you doing work for some other person with material on his land that will come under work contract. 66E(h)
now for your question about the state level point, then the answer is yes, when goods involved and there is sale tax on that and also that is not covered in the 66E(b)(means when land is not transferred) then that is comes in work contract> this is what i understood:
18 April 2013
Under section 66 E(b) is covered when we provide services to buyers that is property is primarily constructed for sale to buyers but consideration should be before completion certificate.
Construction of own house and then sale is obviously not covered, because it will be outright sale.
when a contractor is working for others and provide work + material then covered under works contract service 66E(h)
As well, Work contract services are covered under notification 24/2012 for abatement
while 66E(b) services covered under abatement under 26/2012 for abatement.
18 April 2013
CA Vikas Acharya, thank you so much for clarifying the cumbersome issue of works contract vs construction service. I too had so much of confusion on the topic. I am actually grateful to you.
20 April 2013
I EXPRESS MY DUE REGARDS TO CA. VIKAS FOR ANSWERING THE ABOVE QUESTION. SIR, MY DOUBT IS: 1.WHERE A PERSON CONSTRUCTS COMPLEXES ON HIS OWN LAND AND RECEIVES CONSIDERATION FOR SALE BEFORE RECEIVING COMPLETION CERTIFICATE THEN IT IS TAXABLE AS CONSTRUCTION SERVICE U/S 66E(B) PROVIDED THAT THE GOODS INVOLVED IN THE CONSTRUCTION ARE NOT SUBJECTED TO THE SALES TAX OR VAT.
THAT IS IF IT IS SUBJECTED TO THE SALES TAX OR VAT IT SHOULD TAXED UNDER WORKS CONTRACT EVEN THE LAND BELONGS TO THE PERSON WHO IS CONSTRUCTING THE COMPLEXES
2.SO, WE NEED TO CONSIDER BOTH THE FOLLOWIG POINTS TO DECIDE UPON UNDER WHICH HEAD THE SERVICE IS TAXABLE : A. THE OWNER THE OF THE LAND AS SAID BY CA.VIKAS B. AND THE POINT OF APPLICABILITY OF SALES TAX ON THE GOODS INVOLVED IN THE CONSTRUCTION.
ANOTHER POINT TO QUOTE IS THAT IN ALMOST ALL THE STATES VAT OR SALES TAX IS APPLICABLE ON THE GOODS INVOLVED IN THE CONSTRUCTION . THEREFORE THERE IS NO MUCH PRACTICAL UTILITY OF THIS CONSTRUCTION SERVICE U/S66E(b)
20 April 2013
1st of all welcome you both Miss Priti an Sowmya. Now sowmya, in your 1st point the proviso part you added is wrong (nothing like this mentioned by me that in construction thre could not be vat) basically its true that for works contract material levied with sales tax should be there, but in construction too there could be material having vat/sale tax. the difference as i said is of LAND.
as per your 2nd point the owner of land is to be considered only. vat could be in both cases. because such constructions comes under DEEMED SALES hence state charges vat and on service part of that central charges service tax. "waise bhi states itne badi real estate industry me apna share kyun mana kare"
again i must say this is my understanding, others' may differ.
CAclubindia
