Builder of residential apartments

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 October 2014 AB is a partnership firm.The firm bought a site in the name of firm and started constructing residential apartments having 12 units. It has got registered under AP VAT as works contractor.So far the advances received from the parties are credited to the bank accounts of the two partners Mr.A and Mr.B, who in turn spending the money for construction. The firm says it will obtain completion certificate from Municipality and then only register flats in the vendee's name till then, the advances received from them will also not shown in books of accounts of firm as advance received.By doing this way,they can avoid service tax.
1. Please explain is there any no of flats limit to be exempted for service tax applicable now.
2. If registration under AP VAT is there, is Service Tax again applicable.
3.If the firm directly registers the flats after getting completion certificate from Municipal authority, will it become sale and not service, thus service tax not applicable.
Waiting for detailed explanation from experts please

The period of these transactions are from 1.4.2013 to till date.

Annu Agarwal

Annu Agarwal (Expert)

07 October 2014 1.As per the Defination 2(zc)given in notification number 25/2012,residential complex means any complex comprising of a building or buildings having more than one residential unit.In your case the firm is constructing 12 units this means they are constructing a residential complex.So service tax is applicable.
2.Service tax is applicable even if registration is sought under AP Vat.Service tax is levied by the central government.
3.Even if the firm directly registers the flat after getting completion certificate from municipal authority,any amount received by it from buyers before the completion certification is leviable to service tax.
Please refer to the Declared Services in Section 66E.Clause b clearly states that service tax is not applicable in case of construction where ENTIRE consideration is received after the completion certificate. In your case part consideration is received before completion certificate,therefore service tax applicable.

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