Service tax implication on plotted scheme
This query is : Resolved
RADHAKANTA DAS
(Querist)
04 February 2016
Q.If a builder selling a plot for Rs.10,00,000
Collected towards Land Value Rs.6,00,000
Collected towards Land Development Rs.4,00,000
Whether it attracts service tax if yes then how much % to be paid, any abatement is there?
Collected towards Land Value Rs.6,00,000
Collected towards Land Development Rs.4,00,000
Whether it attracts service tax if yes then how much % to be paid, any abatement is there?
CA R SEETHARAMAN
(Expert)
04 February 2016
Collected towards land value is exempted from service tax. Collected towards land development is subject to service tax excluding material cost.
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Suresh Ramaswamy
(Expert)
05 February 2016
Partly agree with the expert.
Collections towards land value is exempted from service tax.
Collection towards land development is a composite contract to provide material and labour for development of land. This would squarely fall within the definition of Works Contract, even though the materil component and labour component may be separately computed. Hence on the whole consideration of land development Rs.4,00,000/- is subject to Service Tax under Works Contract Service. As per provisions as at present an abatement of 30% on the consideration is applicable and under Reverse charge Mechanism the service recipient is liable to pay 50 % of Service Tax. Therefore the liability of the service provider is Service Tax 14% plus 0.5% Swatch Bharat Cess on 35% of consideration received for Land development.
Collections towards land value is exempted from service tax.
Collection towards land development is a composite contract to provide material and labour for development of land. This would squarely fall within the definition of Works Contract, even though the materil component and labour component may be separately computed. Hence on the whole consideration of land development Rs.4,00,000/- is subject to Service Tax under Works Contract Service. As per provisions as at present an abatement of 30% on the consideration is applicable and under Reverse charge Mechanism the service recipient is liable to pay 50 % of Service Tax. Therefore the liability of the service provider is Service Tax 14% plus 0.5% Swatch Bharat Cess on 35% of consideration received for Land development.
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RADHAKANTA DAS
(Querist)
05 February 2016
Thank you sir for your valuable suggestion if there is no material component what should be the service tax rate?
CA R SEETHARAMAN
(Expert)
05 February 2016
If there is no material involved service tax applicable on full value of 4 lacs.
RADHAKANTA DAS
(Querist)
05 February 2016
14.5% on Rs.4,00,000
CA R SEETHARAMAN
(Expert)
05 February 2016
Yes it is ..............
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