Service tax on construction services

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Lalit (Querist)
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05 March 2012 Actually, I want to know about the burning issue of applicability of Service Tax on construction services.

Now it is more or less settled that services provided by a builder for construction of residential complex is taxable from 1-07-2010 by a deeming provision.

My query is that If the builder has started constructing few bungalows/flats before 1-07-2010 having more than 12 residential units and no agreement to sell has been entered with any prospective buyer till 30-06-2010 and suppose it reaches it completion stage up to 35% till 30-06-2010 and Completion certificate up to this stage has been obtained from chartered engineer.

Now in Sep 2010, builder has entered into agreement to sell with some buyers for sale of flats/bungalows for gross value of Rs. 20,00,000 and now my question is Service Tax would be chargeable on whole Rs.20,00,000 or we can take an assumption that since 35% of total construction has already been done before 1-07-2010 when there was no levy on such services and therefore service tax would be leviable on remaining 65% only.

Please suggest me your views on the same and what is the industry practice is being followed in this regard.

bharat

bharat (Expert)
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05 March 2012 Service tax in on the value of services provided after 30.06.2010. hence you can take exepmtion of the services provided till that date. so you are liable to pay only on 65% of the agreement value. also any amount received form suctomer prior to 30.06.2010 is exempt through notification. so you can take the expemtion form the below two amount :-
1) 35% of the agrement value.
2) amount received form customer till 30.06.2010.

hope this will sufice your requirement.

Regards
Bharat

Lalit

Lalit (Querist)
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05 March 2012 Dear Mr.Bharat,

Thanks for your reply.

It is correct that any services provided or any amount received before 1-07-2010, service tax will not be payable.

But the problem is that if there was no agreement to sell entered between buyer & seller before 1-07-2010 or there was no service recipient before 1-07-2010 but the construction got completed up to 35% till 30-06-2010.

Now later on afterwards 1-07-2010, the builder find some seller for the bungalow/flat and now question is whether service tax would be leviable on 35% portion completed before 1-07-2010.

In my view Service Tax will be payable on 100% Transaction value.

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bharat

bharat (Expert)
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15 March 2012 Dear Lalit,

35% will not be taxed as the applicability of services tax is starts form 01/07/2010.

Regards
Bharat