Servive tax libility & value of service tax

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CA TAHIR ALI KHAN (Querist)

26 April 2013 a private limited company is engaged in construction of various residential houses.the land is not in the name of the company but it is in the name of directors of the company.company only construct the houses using material purchases by it and sales the houses to the customers.on what value & at which rate the company will pay service tax & what are the consequenses for directors

CA Vikas Acharya

CA Vikas Acharya (Expert)

26 April 2013 1st point which i must mention is if the company is making individual residential units, the same is exempt under notification 25/2012.
in case of multiple units like flats in a building or a complex, read the following

For Company:
In that case when company do not have the land in its name, and providing material too.. for construction then the same will fall under ORIGINGAL WORKS CONTRACT. and as per Service tax valuation rules, The company has to pay tax on 40% value. as 60% abatement is there.

For Directors:
1st of all no reverse charge. the directors are not required to pay service tax on reverse charge basis on 50% value on the liability of company, as individual is not liable in partial reverse charge.
now comes the point is the director liable on sale.
directors are liable IF they charges ANY AMOUNT OF MONEY on sale from buyers before the construction get completed and certified by the authority.
now if so, then directors are liable to pay tax on service tax @ 25% (though in case of:-
(a. for residential unit having
carpet area upto 2000 square feet
or where the amount charged is
less than rupees one crore;
b. commercial units) it is 30% from the date 01.03.2013 as per notification 2/2013

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