SERVICE TAX ON CONSRUCTION OF RECSI.COMPLEX

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CA.Krishna (Querist)
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26 April 2011 I AM CONSTRUCTING RESIDENTIAL COMPLEX HAVING 5 SEPARATE BUILDINGS HAVING 12 RESIDENTIAL FLATS IN EACH OF THE BUILDING.

UNDER SERVICE TAX DEFINATION...
“residential complex” means any complex comprising of—
(i) a building or buildings, having more than twelve residential units;

ii) a common area; and

iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person "

CAN I FALL UNDER SERVICE TAX IF I HAVE FULFILLED THE ALL CONDITIONS OF ABOVE DEFINATION EXCEPT 2 BELLOWS

(i) MY each building having only twelve residential units;

(ii)My layout of such premises is NOT approved by an authority under any law for the time being in force

Please reply me and also say the tax rate and abatement if service tax applicable .

Amit Agrawal

Amit Agrawal (Expert)
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27 April 2011 (i) a building or buildings, having more than twelve residential units;

it mean
if in one complex there are more than 1 bulding than for the purpose of counting 12 residential unit all unit shall be clubed and in your case it is 60 unit hence your 1 condition for liability of service tax get fullfilled.

(ii) normally for lay out of complex like in your case required approval from town development authority in all over india u should confirm it. you have to take the permission

there are following sequance for ascertaining liability for service tax

if vat payable under state act than service tax payable under work contract and effective service tax rate 4.12 % without cenvat credit

if vat is not payable than it will taxable under construction of complex service.

CA.Krishna

CA.Krishna (Querist)
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28 April 2011 thank u Amit

but in my case lay out is submitted for approval but not sanctioned by the authority as the area is still not covered under town planning. So it will be approved when new area for town planning will be sanctioned.

but before that most of the flats will be sold.

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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24 July 2025 Thanks for sharing the details! Here’s a clear summary of the **service tax implications on your residential complex construction** based on your scenario:

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### Key Points from Your Query:

* You are constructing a **residential complex with 5 buildings**, each having **12 flats**, so total 60 flats.
* **Definition requires**:

1. A building or buildings having **more than 12 residential units** (your total flats = 60, so this condition is met when combined).
2. The **layout is approved by an authority** under law.
* Your **layout is submitted but not yet approved**, as the area is currently not under town planning jurisdiction.
* You want to know if you are **liable to pay service tax** despite no approval yet.
* You want to know the **rate of service tax and abatement** applicable.

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### Interpretation and Tax Implications:

#### 1. **Number of Residential Units:**

* The service tax definition considers the entire complex.
* Since total flats = 60 (more than 12), you satisfy this condition.
* So, your complex falls under the “residential complex” definition **on the number of units**.

#### 2. **Layout Approval:**

* Approval from the competent authority (such as Town Planning or Development Authority) is **mandatory** to fall under the residential complex construction service.
* Since your layout is **not yet approved**, you **do not strictly fall under the residential complex service tax category** right now.

#### 3. **What happens in this case?**

* Since **layout is not approved**, the construction service is **not treated as residential complex service**.
* Instead, **work contract service tax** may apply, which covers construction activities not covered under residential complex service.

#### 4. **Tax Rate & Abatement:**

* For **work contract services** (if VAT is paid on materials used):

* **Effective service tax rate is 4.12%** (after abatement).
* No CENVAT credit on inputs.
* For **residential complex construction services** (if layout approved):

* Service tax rate is **12.36% (including cess)** on gross amount.
* **Abatement of 75%** (meaning tax is on 25% of value), effectively 3.09% on gross amount.
* CENVAT credit available on inputs used.

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### Your Scenario Summary:

| Condition | Your Case | Tax Implication |
| ----------------------------- | ---------------------------- | --------------------------------------- |
| More than 12 flats in complex | Yes (60 flats) | Condition met |
| Layout approval by authority | Not yet approved | Condition NOT met |
| VAT payable on materials? | (You need to check) | If yes, tax as work contract @ 4.12% |
| Service tax applicable? | Likely work contract service | Pay service tax at effective 4.12% rate |
| CENVAT credit | No for work contract | No credit allowed |

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### Additional Notes:

* If you get **layout approval later**, you may be liable for service tax on construction as “residential complex” service from that date onward.
* It’s important to maintain records of approvals and sales timelines to justify the applicable tax treatment.
* Consult with a tax professional to keep track of approvals and ensure correct compliance.

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If you want, I can help you draft a checklist or prepare documentation to track your approvals and tax obligations.

Does that help clarify your position?

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