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Service tax on under-construction property

Neha sharma (-) (1257 Points)

11 January 2013

I heard that Service Tax is levied on the purchase of under-construction property as well...

Could anyone guide me regarding how much abatement is allowed on the same and is it levied on all builders or only specified category builders..

I would highly appreciate if you could support your answers with relevent links....

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3 Replies

CA. Manish Chandarana (Practising CA) (100 Points)
Replied 11 January 2013

All Builders are required to get themselves registered under service tax & have to collect service tax from their customers @ 3.09 % on bookings received from the customers & pay the same to the credit of Central govt via challan GAR 7 & also file the service tax returns ST-3 on regular basis.

Neha sharma (-) (1257 Points)
Replied 11 January 2013

Thanks Manish for your respose..

Does that mean that there is an abatement of 75% and Service Tax is levied only on 25% of the Amount ??

Vikas (CA) (1135 Points)
Replied 11 January 2013

Dear Neha,

If he is a builder who is owning a land also, then he may opt for the abatement of 75% on the total value including the land value and would not be able to claim the cenvat on the input services. [Refer Notification No.26/2012-ST dated 20 June 2012]

If he is merely acting as a developer, then the service tax would be chargeable as per Rule 2A of the Service tax (Determination of Value) Rules, 2006, wherein you may opt for

1) an option for segregation of labour and meterial and thereby claim 100% cenvat; or

2) an option for charging 40% tax on the total contract value but you will not be able to claim any cenvat on the inputs.

I have referred for various provisions, that you may refer for better understanding.