Service tax in case of works contract

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This query is : Resolved

Aishwarya (Querist)

20 January 2017 Dear All,

I have doubt with regard to service tax on works contract, suppose there is a JDA agreement, the builder buys back the owner's share flats and makes revenue out of it is service tax attracted on bought back flats. According to me the bought back flats does not fulfil the definition of works contract either then how is service tax chargeable on such sale ? Please guide me .

Thanks in advance

Regards,
Aishwarya

CA Ashish Garg

CA Ashish Garg (Expert)

20 January 2017 In this case, if you have bought the flats from the landlord, then the construction service provided by you shall remain taxable under works contract service as the ultimate responsibility of the completion of flats rest on the landlord and he is still acting in the capacity of builders.

However, if you have bought its share of land, then in such a case, you would be liable to pay service tax as builder on the sale of flats earlier belonging to the landlord. There will be no service tax on transfer of land by landowner.

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Aishwarya

Aishwarya (Querist)

20 January 2017 Thank you for your reply Sir, So you mean to say even if the owner's share of flat is bought back by the builder paying some consideration its owner's responsibility to collect service tax as it still amounts to works contract. How about if the builder after buying back the flats then sells it to 3rd party then there is no applicability of service tax right ?

Aishwarya

Aishwarya (Querist)

CA Ashish Garg

CA Ashish Garg (Expert)

20 January 2017 Yes because the risk and rewards of flat still lies with the owner.

Further if the builder sell these flats to any third party, it will not be subject to service tax as it is mere transfer of immovable property

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