service tax
This query is : Resolved
21 June 2016
is it service tax applicable on construction of complez
21 June 2016
yes service tax is applicable
06 July 2016
I want know whether service tax applicable on built up area given to land owners in kind consideration. if yes when. is it after getting occupancy or on day of credit in books. and how to value.
24 July 2025
Yes, service tax is applicable on the construction of complex including consideration given in kind (i.e., built-up area given to landowners under Joint Development Agreements — JDAs), as per the provisions prior to GST (i.e., before July 1, 2017).
✅ 1. Applicability of Service Tax on Built-up Area to Landowners (under JDA):
When a builder/developer constructs a residential or commercial complex and gives a portion of the built-up area to the landowner as consideration (instead of cash), this is treated as a “service” provided to the landowner.
This activity attracts service tax under the category of “Construction of Complex Service”.
Service tax is payable even though no monetary consideration is involved.
🧾 2. Point of Taxation (When to Pay Service Tax):
Under Point of Taxation Rules, 2011, for barter/consideration in kind, service tax becomes payable:
At the time when the developer transfers possession or rights of the constructed area to the landowner (i.e., execution of the agreement or handover of possession),
OR when the value is credited in the books,
whichever is earlier.
🟡 In most cases, this would be the date of handing over possession of the built-up area to the landowner.
💰 3. Valuation for Service Tax:
As per Rule 3 of the Service Tax (Determination of Value) Rules, 2006, if consideration is in kind (built-up area):
Value = Fair Market Value (FMV) of the service provided.
So,
You need to determine the market value of the built-up area given to the landowner,
That becomes your taxable value, and you charge service tax @ 14% (or as applicable for the relevant period) on that.
📝 Example:
If you give 10 flats worth ₹80 lakh each (FMV) to the landowner:
Total taxable value = ₹8 crore,
Service tax = 14% of ₹8 crore = ₹1.12 crore (plus applicable cesses, if before Nov 2015).
❗ Important Notes:
If construction is for personal use, it is exempt.
After July 1, 2017, this entire regime is subsumed under GST, and GST applies instead.
✅ 1. Applicability of Service Tax on Built-up Area to Landowners (under JDA):
When a builder/developer constructs a residential or commercial complex and gives a portion of the built-up area to the landowner as consideration (instead of cash), this is treated as a “service” provided to the landowner.
This activity attracts service tax under the category of “Construction of Complex Service”.
Service tax is payable even though no monetary consideration is involved.
🧾 2. Point of Taxation (When to Pay Service Tax):
Under Point of Taxation Rules, 2011, for barter/consideration in kind, service tax becomes payable:
At the time when the developer transfers possession or rights of the constructed area to the landowner (i.e., execution of the agreement or handover of possession),
OR when the value is credited in the books,
whichever is earlier.
🟡 In most cases, this would be the date of handing over possession of the built-up area to the landowner.
💰 3. Valuation for Service Tax:
As per Rule 3 of the Service Tax (Determination of Value) Rules, 2006, if consideration is in kind (built-up area):
Value = Fair Market Value (FMV) of the service provided.
So,
You need to determine the market value of the built-up area given to the landowner,
That becomes your taxable value, and you charge service tax @ 14% (or as applicable for the relevant period) on that.
📝 Example:
If you give 10 flats worth ₹80 lakh each (FMV) to the landowner:
Total taxable value = ₹8 crore,
Service tax = 14% of ₹8 crore = ₹1.12 crore (plus applicable cesses, if before Nov 2015).
❗ Important Notes:
If construction is for personal use, it is exempt.
After July 1, 2017, this entire regime is subsumed under GST, and GST applies instead.
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