Service tax on sale of under-construction property

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 February 2016 A company is doing construction of a semi commercial building on its own land. At present the property is under-construction and company has not received the completion certificate from the competent authorities. Moreso, till now the company has not received or taken any advance for sale of space in the said property. Now the company wants to sell the entire property to a buyer who is ready to buy the property in as and where is it condition.

Whether the service tax will be applicable in case the same is sold to a single person as a single unit?

CA. Divyansh Agarwal

CA. Divyansh Agarwal (Expert)
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05 February 2016 Exemption available for single residential unit since this is commercial hence not available.However if there some portion which is residential then u can treat as single residential provided u have some proof and it can be used as such for single family and both contract should be separate . and also it would be beneficial if u pay service tax under works contract by deducting land value from total consideration for commercial part

Querist : Anonymous

Querist : Anonymous (Querist)

06 February 2016 Sir. only ground floor of the building is commercial and all other areas are for residential.

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Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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07 February 2016 As CA Divyansh Agarwal has clarified, the residential portion is exempt from service provided it is sold to a single owner for residential purposes for himself. The onus us on you to prove that the residential portion is being used for residential purpose by a single family - but if what is under construction is a block of apartments, then obviously it is not sale of residential property for single user. Since the ground floor is commercial property and the other floors are residential, how many dwelling units are there in the residential area - one or more? Again is it possible to separate the land value only for the commercial portion. Since the property is still under construction and the consideration is received for an under construction property, service tax ought to be levied. You may avail of the abatements available and collect service tax on the abated value of construction services inclusive of land value.

Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2016 thanks to all for their valuable opinion