Regarding classification

This query is : Resolved

Om Prakash Choubey (Querist)
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10 February 2016 Dear Team,

One of the my client has got the work order for construction of complex for the builder. He uses nails and wires for during the construction of complex. The builder is asking him to raise a bill under work contract service because for using the nails and wires during the construction of complex.

Whether, my client should raise the bill under construction of complex services or work contract services ??.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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13 February 2016 As per Section 66E(b) of the Finance Act, 1994, construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. Competent authority means the Government or any authority authorised to issue completion certificate.

If entire consideration is received after the issuance of completion certificate, the same will be called a ‘sale’ and it is not liable to service tax. This entry covers the services provided by builders or developers or any other person, where building complexes, civil structure or part thereof are offered for sale and payment for such building or complex or part thereof is received before the issuance of completion certificate.

Since Construction activities are a declared service under the provisions of Finance Act 1994 (as amended), irrespective of the classification adopted by the assessee the Department will follow the provisions of the Act and treat the Declared Service as Construction Service.

Even if tax is paid partly by the service recipient under Works Contract Service, the department will levy the difference with interest and penalty from your client as and when they get the information.