Service Tax on Construction of complex Service

This query is : Resolved

Kalpesh (Querist)
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23 January 2009 Our firm is engaged in Commercial Construction Business. During the course of business, If wish to make some contracts with different contractors for the following works each of them is below Rs. 9 Lac:

1. Electric fitting labor charges worth of
Rs. 600000

2. Bore expenses with submersible pump
Rs. 250000

3. Coloring work only labor Rs. 500000

4. Plaster work only labor Rs. 750000

Now my queries are

In this case whether the firm will be liable to pay service tax or the different contractors as no one individual service is exceeding Rs. 10 lack ?

If the firm is liable to pay service tax whether it will be restricted to above work done through others or on all labor works which are got done employing direct laborer

Whether the provisions of circular No. 332/35/2006 dated 01-08-2006 can be applied to this service also ?

Kindly opine.

Kalpesh

CA. C V SURYAM

CA. C V SURYAM (Expert)
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23 January 2009 No, as per the notification 6/2005-ST read with amended notification 8/2005-ST, the value of all the taxable services provided by a registered service provider shall be considered for overall limit. That is to say, individual services as long as covered under one registration, cannot be considered separately for the SSI limit. Anyway, you may please mail me or post here the circular referred by you as the same is not available with me.

Kalpesh

Kalpesh (Querist)
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23 January 2009 Please find the following is circular No. 332 as instructed by you.

Service Tax Circular No: F. No. 332/35/2006 ? TRU (01-Aug-06) Clarification on applicability of service tax on real estate developers / builders ? Regarding.
Information provided by Legalpundits.com

Subject:Clarification on applicability of service tax on real estate developers / builders -- Regarding.

Please refer to your letter dated 21.06.06 on the above subject.

2. I have been directed to state the following relating to levy of service tax on "construction of complex" service falling under section 65(105)(zzzh) and "commercial or industrial construction" service falling under section 65(105)(zzq) of the Finance Act, 1994:

Sr. No.

Issue

Legal Position

1.

Is service tax applicable on Builder, Promoter or Developer who builds a residential complex with the services of his own staff and employing direct labour or petty labour contractors whose total bill does not increase 4.0 lacs in one F/Y?

In a case where the builder, promoter or developer builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of such residential complex, the contractor shall be liable to pay service tax on the gross amount charged for the construction services provided, to the builder / promoter / developer under ''construction of complex'' service falling under section 65(105)(zzzh) of the Finance Act, 1994.

If no other person is engaged for construction work and the builder / promoter / developer undertakes construction work on his own without engaging the services of any other person, then in such cases in the absence of service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not arise.

Service tax exemption for small service providers upto an aggregate value of taxable services of Rs. 4 lakh provided in any financial year vide notification No. 6/2005-Service Tax dated 01.03.05 is applicable for ''construction of complex'' service also.

2.

Again will service tax be applicable on the same, in case he constructs commercial complex for himself for putting it on rent or sale?

Commercial complex does not fall within the scope of "residential complex intended for personal use". Hence, service provided for construction of commercial complex is leviable to service tax.

3.

Will the construction of an individual house or a bungalow meant for residence of an individual fall in purview of service tax, is so, whose responsibility is there for payment?

Clarified vide F. No. B1/6/2005-TRU dated 27.07.05, that residential complex constructed by an individual, intended for personal use as residence and constructed by directly availing services of a construction service provider, is not liable to service tax.

4.

Is payment of service tax a responsibility of service provider or of whom the service is provided?

As per section 68 of the said Act, in case of ''construction of complex'' service falling under section 65(105)(zzzh) and ''commercial or industrial construction'' service falling under section 65(105)(zzq) of the said Act, every person providing taxable service to any person shall be liable to pay service tax.

As per section 66A of the said Act, if the service is provided from outside India to a person in India, then in such cases service tax is required to be paid by the recipient of such service.

5.

If it is applicable on the Real Estate Developers, a detailed guideline of tax calculation and date from which it will be applicable. If it is from retrospective effect, and the service provider has left the work and no payment is due for him, who will pay?

Notification No. 1/2006-Service Tax dated 01.03.06 provides for levy of service tax on 33% of the gross amount charged for the services provided or to be provided, subject to fulfillment of the conditions specified in the said notification. Service tax is leviable on,-(i) ''commercial or industrial construction'' service falling under section 65(105)(zzq) with effect from 10.09.04, and(ii) ''construction of complex'' service falling under section 65(105)(zzzh) with effect from 16.06.05.

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