Service tax on real estate agency
This query is : Resolved
20 April 2015
Dear Experts,
One of my friend is doing a real estate business (under a firm name).
In his business he is doing purchasing and sale of plots, constructing building, selling houses, receiving commission for doing brokerage work?
Kindly which of the business(s) covered under service tax?
Thank you in advance
One of my friend is doing a real estate business (under a firm name).
In his business he is doing purchasing and sale of plots, constructing building, selling houses, receiving commission for doing brokerage work?
Kindly which of the business(s) covered under service tax?
Thank you in advance
20 April 2015
https://www.charteredclub.com/service-tax-on-under-construction-property-3-09/
Message likes :
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20 April 2015
Dear Arpit Shah sir,
What about sale of plots and commission received from brokerage business with regard to service tax?
What about sale of plots and commission received from brokerage business with regard to service tax?
24 July 2025
Here’s a clear breakdown for your friend’s real estate business and **service tax applicability** on various activities (as of 2015 service tax law):
---
### 1. **Sale of Plots (Land)**
* **No service tax** on sale of **plots or vacant land** because it is considered a sale of immovable property, which is outside the service tax net.
* Selling plots is treated as a **sale of goods (immovable property)**, not a service.
---
### 2. **Construction and Sale of Houses / Buildings**
* If your friend **constructs residential buildings** and sells them, **service tax is applicable if:**
* The building has **more than 12 residential units (flats)**, OR
* The project is a commercial complex or a mixed-use complex.
* Service tax is charged on the **value of construction service**, with a **75% abatement** allowed for the cost of materials.
* If the project has **12 or fewer residential units**, service tax on construction service is **not applicable**.
---
### 3. **Commission Received for Brokerage / Agency Services**
* Commission earned from **real estate brokerage or agency services** is covered under **“Real Estate Agent” services** (Service Tax under SAC 9971).
* Service tax is **applicable on commission amount**, and the agent must pay service tax on the brokerage income.
* If turnover is below the small service provider limit (Rs. 10 lakhs), exemption applies.
---
### Summary Table
| Activity | Service Tax Applicability |
| ---------------------------------- | ------------------------------------------------------ |
| Sale of vacant plots | Not taxable (sale of immovable property) |
| Construction and sale of buildings | Taxable if >12 residential units or commercial project |
| Real estate brokerage commission | Taxable on commission amount |
---
### Additional Notes
* If your friend is registered for service tax, he must segregate the value of services (like brokerage or construction) from sale of goods (plots).
* Service tax is **not charged on sale price of land or completed buildings**, only on the service component.
* Make sure to check if any abatements or exemptions apply as per latest notifications.
---
If you want, I can help draft a more detailed explanation or check if any recent changes apply. Would you like that?
---
### 1. **Sale of Plots (Land)**
* **No service tax** on sale of **plots or vacant land** because it is considered a sale of immovable property, which is outside the service tax net.
* Selling plots is treated as a **sale of goods (immovable property)**, not a service.
---
### 2. **Construction and Sale of Houses / Buildings**
* If your friend **constructs residential buildings** and sells them, **service tax is applicable if:**
* The building has **more than 12 residential units (flats)**, OR
* The project is a commercial complex or a mixed-use complex.
* Service tax is charged on the **value of construction service**, with a **75% abatement** allowed for the cost of materials.
* If the project has **12 or fewer residential units**, service tax on construction service is **not applicable**.
---
### 3. **Commission Received for Brokerage / Agency Services**
* Commission earned from **real estate brokerage or agency services** is covered under **“Real Estate Agent” services** (Service Tax under SAC 9971).
* Service tax is **applicable on commission amount**, and the agent must pay service tax on the brokerage income.
* If turnover is below the small service provider limit (Rs. 10 lakhs), exemption applies.
---
### Summary Table
| Activity | Service Tax Applicability |
| ---------------------------------- | ------------------------------------------------------ |
| Sale of vacant plots | Not taxable (sale of immovable property) |
| Construction and sale of buildings | Taxable if >12 residential units or commercial project |
| Real estate brokerage commission | Taxable on commission amount |
---
### Additional Notes
* If your friend is registered for service tax, he must segregate the value of services (like brokerage or construction) from sale of goods (plots).
* Service tax is **not charged on sale price of land or completed buildings**, only on the service component.
* Make sure to check if any abatements or exemptions apply as per latest notifications.
---
If you want, I can help draft a more detailed explanation or check if any recent changes apply. Would you like that?
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