Service tax on builders

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2014 sir my query is if the advance money is received by builders for Rs 1 lac & builder have issued the letter of allotment of Rs 1 crore the the service tax would be levied on on Rs 1 lac or Rs 1 crore ????the builder is engaged in the business of redevelopment ??

Along with the relevant notification

thanks in Advance !!!!!

CA Rajya lakshmi

CA Rajya lakshmi (Expert)

13 November 2014 Service Tax to be paid only on Rs.1,00,000/- , how can you pay tax on Rs.1 crore when the amount is not credited , Point of taxation rules 2011 clearly state service tax to paid whichever is earlier i.e 1. Receipt of amount 2. service done 3. Tax invoice . As Letter of allotment is not invoice nor it is an agreement and you did not collect the amount no service tax on Rs.1 crore

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2014 thanks a lot !!1
But what in case agreement for 1 crore is registered but i had received only 1 lac rupees in that case whether service tax is on 1 lac or 1 crore

Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2014 in case if there is any notification please let me know

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

24 July 2025 Here's the clear answer to your query on **service tax on builders receiving advance and having a registered agreement for a higher amount**:

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### Scenario:

* Builder receives **₹1 lakh advance**.
* Agreement registered for **₹1 crore**.

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### What is the taxable value for service tax?

**Service tax is payable on the value of the amount actually received or the value of the service provided, whichever is earlier, as per the Point of Taxation Rules, 2011.**

* Since only ₹1 lakh has been received, service tax liability arises on ₹1 lakh **only**.
* The fact that the agreement is registered for ₹1 crore does **not** create a tax liability on ₹1 crore unless the full amount is received or the service is rendered.
* The **Letter of Allotment or registered agreement is not a tax invoice**; service tax is levied on receipt of consideration or invoicing, whichever is earlier.

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### Relevant Provisions / Notification

* **Point of Taxation Rules, 2011** (Notification No. 8/2011-ST dated 1 March 2011) states:

> The point of taxation is the earliest of:
>
> 1. Date of receipt of amount; or
> 2. Date of issue of invoice; or
> 3. Date of provision of service.

* Since payment receipt date is the earliest, tax is calculated on that amount received.

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### Summary

| Amount Received | Taxable Value for Service Tax |
| ----------------------------------------------- | ----------------------------- |
| ₹1 lakh | ₹1 lakh |
| ₹1 crore (agreement value) but ₹1 lakh received | ₹1 lakh only |

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If you want, I can provide the exact text of the notification and draft a formal explanation for your reference.

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