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)
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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 online

(Expert)
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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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