Service tax applicability
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
18 December 2013
Dear Sir,
One of our client who is a Public Limited Company deals with the purchase and sale of Land. The company first purchases the land and sell the same to clients after dividing the land into small plots.
The facilities provided with such plots are water connection, electricity connection, internal roads with street lightning and boundary walls which surrounds the land. Apart from this, not doing any kind of construction work. My query is whether Service tax for this company is applicable or not.
The company has already applied for VAT/CST.
Please reply whether service tax is applicable or not and if yes than what percentage.
Thanking You.
One of our client who is a Public Limited Company deals with the purchase and sale of Land. The company first purchases the land and sell the same to clients after dividing the land into small plots.
The facilities provided with such plots are water connection, electricity connection, internal roads with street lightning and boundary walls which surrounds the land. Apart from this, not doing any kind of construction work. My query is whether Service tax for this company is applicable or not.
The company has already applied for VAT/CST.
Please reply whether service tax is applicable or not and if yes than what percentage.
Thanking You.
Querist : Anonymous
Querist :
Anonymous
(Querist)
18 December 2013
Dear Sir,
Please reply at the earliast
Please reply at the earliast
24 July 2025
Hi!
Regarding the service tax applicability for your client who is a public limited company engaged in buying and selling land plots with certain facilities like water, electricity, roads, street lighting, and boundary walls — here’s the detailed explanation:
1. Is Service Tax Applicable on Sale of Land / Plots?
No, service tax is not applicable on sale of land or plots of land.
Sale of immovable property in the form of land is a sale of goods under VAT/CST regime, not a service, hence outside the scope of service tax.
2. What about the facilities provided?
The facilities such as water connection, electricity connection, internal roads, street lighting, boundary walls are considered as part of the land development.
Mere development of land or providing these basic amenities does not amount to construction of an immovable property for sale and thus does not attract service tax.
If there was construction of buildings or flats, then service tax under ‘Works Contract Service’ or ‘Construction Service’ might apply. But in this case, since there is no construction, service tax is not applicable.
3. Legal and Regulatory References
Service Tax on construction works applies mainly to construction of buildings or civil structures. The sale of land and basic amenities is excluded.
As per the Finance Act and CBEC circulars, service tax is not leviable on sale of land or plots.
4. Your client’s current VAT/CST registration
This is appropriate because the sale of land/plots is governed by VAT/CST (Sales Tax) laws.
Summary
Activity Service Tax Applicability Tax Rate (if applicable)
Sale of land or plots Not applicable N/A
Providing basic amenities (water, roads, electricity, boundary walls) Not applicable (part of land development) N/A
Construction of buildings/flats Applicable under Works Contract / Construction Service 14% + cess (currently 15%)
If your client starts constructing buildings or complex structures on the land, then service tax will be applicable on the construction services portion.
Regarding the service tax applicability for your client who is a public limited company engaged in buying and selling land plots with certain facilities like water, electricity, roads, street lighting, and boundary walls — here’s the detailed explanation:
1. Is Service Tax Applicable on Sale of Land / Plots?
No, service tax is not applicable on sale of land or plots of land.
Sale of immovable property in the form of land is a sale of goods under VAT/CST regime, not a service, hence outside the scope of service tax.
2. What about the facilities provided?
The facilities such as water connection, electricity connection, internal roads, street lighting, boundary walls are considered as part of the land development.
Mere development of land or providing these basic amenities does not amount to construction of an immovable property for sale and thus does not attract service tax.
If there was construction of buildings or flats, then service tax under ‘Works Contract Service’ or ‘Construction Service’ might apply. But in this case, since there is no construction, service tax is not applicable.
3. Legal and Regulatory References
Service Tax on construction works applies mainly to construction of buildings or civil structures. The sale of land and basic amenities is excluded.
As per the Finance Act and CBEC circulars, service tax is not leviable on sale of land or plots.
4. Your client’s current VAT/CST registration
This is appropriate because the sale of land/plots is governed by VAT/CST (Sales Tax) laws.
Summary
Activity Service Tax Applicability Tax Rate (if applicable)
Sale of land or plots Not applicable N/A
Providing basic amenities (water, roads, electricity, boundary walls) Not applicable (part of land development) N/A
Construction of buildings/flats Applicable under Works Contract / Construction Service 14% + cess (currently 15%)
If your client starts constructing buildings or complex structures on the land, then service tax will be applicable on the construction services portion.
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