Service tax on landlord share

This query is : Resolved

v yadagiri reddy (Querist)
Follow

16 August 2013 1. Does developers has to pay service tax on landlord share? if yes, when service tax is to be collected or remitted?

2. If the landlord sold his share before obtaining completion certificate then what is the value of taxable service on which developer has to pay service tax?

CA Suresh Jain

CA Suresh Jain (Expert)
Follow

17 August 2013 The correct answer could only be given only after going through the joint development agreement etc. which specifies the relationship of land lord and developers and the mode of transfer of landlord's share etc.

v yadagiri reddy

v yadagiri reddy (Querist)
Follow

17 August 2013 Good Morning Mr. Jain,

1. The relationship between landlord & developers is
Developer's share : 56%, i.e. 17 flats
Landlord's share: 44%, i.e. 13 flats

2. The developer transfer landlord's share of flats after completion of work.

But before completion of work, the landlord sold one semi finished flat towards his share to a buyer.

Now the question is whether developer has to pay service tax on the value of semi finished flat i.e as per sale deed or on the full value of the semi finished Flat sold i.e. as per Sale Agreement.

Let me know Mr. Jain if you want any further details.

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
Follow

24 July 2025 Thanks for sharing the details. Here’s a detailed explanation on **service tax on landlord’s share in a Joint Development Agreement (JDA)** context:

---

### 1. **Does the developer have to pay service tax on landlord’s share?**

* Yes, **service tax is applicable on the ‘construction service’ provided by the developer** under the category of “Construction of Residential Complex Service” (covered under “Construction Service”).
* The developer is considered the service provider for the entire construction activity, including the landlord’s share.
* Service tax is payable **on the gross amount charged for construction services** including the landlord’s share, when the developer transfers possession or ownership of the flats.

---

### 2. **When is the service tax to be collected/remitted?**

* Service tax liability arises **when the developer transfers the possession or ownership** of flats to the landlord or third party.
* If the landlord’s share is transferred by the developer (whether to the landlord or directly to a third party), the developer must pay service tax on the value of such transfer.
* The service tax on the landlord’s share is to be **paid by the developer**, not the landlord.

---

### 3. **If the landlord sells his share before obtaining Completion Certificate (CC), what is the taxable value?**

* The **service tax is applicable on the value of construction service**, which generally means the consideration or the amount charged for construction.
* **Taxable value is usually the amount stated in the agreement between developer and landlord or between landlord and buyer, whichever is relevant for the developer’s service.**
* Since the flat is semi-finished and sold before CC, the **developer’s taxable value for service tax will be based on the construction cost or the price agreed between the developer and landlord for that flat**, not the resale value between landlord and buyer.
* The **sale deed value between landlord and buyer** is irrelevant for developer’s service tax liability.
* The taxable event for developer is **transfer of constructed property to landlord**, so tax is on developer’s consideration (value of construction provided to landlord).

---

### 4. **Additional notes:**

* If the landlord sells the share before completion, the buyer of the landlord’s share may have to pay stamp duty, but **service tax liability rests with the developer on the value of construction service rendered**.
* The developer should ensure the value considered for landlord share is clearly mentioned in the JDA or agreements.
* Also, **abatement of 75% is generally available for construction of residential units**, so service tax is payable only on 25% of the gross amount (check if conditions are met).

---

### **Summary:**

| Question | Answer |
| -------------------------------------------------------- | ---------------------------------------------------------------------------------- |
| Developer’s liability for service tax on landlord share? | Developer pays service tax on landlord’s share (construction service). |
| When to pay? | On transfer of possession/ownership by developer to landlord or buyer. |
| Taxable value if landlord sells before CC? | Value of construction service charged by developer to landlord (not resale value). |

---

If you want, I can help draft a clause or prepare the calculation format for service tax on your landlord share. Would that be helpful?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now