Service Tax on residential complex

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This query is : Resolved

CA Jigar Parikh (Querist)

27 May 2010 Is there any abatement granted to the service provider in case of construction of residential complex with reference to the Finance Act, 2010? [By virtue of Finance Act, 2010, an explanation has been added in sub caluse (zzzh)]. If yes, what is the quantum of abatement?

Kindly give the reference of such notification, if any!

Guest

Guest (Expert)

27 May 2010 The contractor is entitled to claim abatement to the extent of 67 per cent of the value of services rendered by him. It must also be understood that similar to the VAT, input tax credits could be available to offset these service taxes and hence the net effect of the tax could be lesser than the 3.4 per cent, since construction attracts service tax only on 33 per cent of the value.

CA Jigar Parikh

CA Jigar Parikh (Querist)

27 May 2010 Thanks you for the reply.

In the present provision, where the construction of residential complex is covered under the deemed applicablity (added by way of an explanation) in a situation where the buyer (or say prospective buyer) makes advance payment to the buider, the builder is liable to make payment of service tax to the credit of government. In such case, is he still elegible for 67% abatement?

The point here is, the possession of the property will be handed over in the future date and the agreement entered at present is with regard to "future sale agreement". The money so paid by the buyer can be considered as token money. In such case, whether service tax is applicable?? (in the light of provision as amended by Finance Act, 2010?)

Madhukar N Hiregange

Madhukar N Hiregange (Expert)

07 June 2010 Options are available.
Under works contract - 75%
Under Not 1/2006 Construction - 67%
Under Not 12/2003 - amount offerred for VAT

Under WC compostion scheme also possible @ 4.12%.
In all options except 1/2006 credit of input services + capital goods is available.

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