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Service tax on affordable housing

Shivish Verma (C A) (376 Points)

31 May 2016

Dear Sir

Q 1

My client xyz pvt ltd is developing affordable housing project in faridabad having area less than 60 sq mt per flat.

In view of recent amendment in finance act 2016, such service is exempted now.

Please clarify, should he charge service tax ?

Q 2

Xyz pvt ltd (mentioned above) hired works contractor for developing affordable housing project. Should Works contractor charge service s tax from developer ?

Should developer XYZ pvt ltd take service tax registration ?

Please reply ASAP

Thanks

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5 Replies

ravi teja (CA) (37 Points)
Replied 01 June 2016

Q1. The Exemption you are talking is reproduced below

"Services by way of construction etc. in respect of-

(i) housing projects under Housing For All (HFA) (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY);

(ii) low cost houses up to a carpet area of 60 square metres in a housing project under “Affordable housing in Partnership” component of PMAY,

(iii) low cost houses up to a carpet area of 60 square metres in a housing project under any housing scheme of the State Government,

are being exempted from Service Tax with effect from 1st March, 2016."

So it applies only if the above conditions are satisfied

Q2.works contractors are subject to service tax and the same will be recovered from the service receiver

Q3.If the developer XYZ Pvt Ltd sales any plots before obtaining completion certificate as provided in the act he is subject to service tax so it is better to get the registration

Shivish Verma (C A) (376 Points)
Replied 03 June 2016

Thanks for reply

yes all the conditions are satisfied.

but i think new entry (ca) in entry no 14 of notification no 25 dt 20.6.12 which you mentioned above is applicable to works contractor and if works contractor provides service in relation to construction of low cost houses etc is exempt

ravi teja (CA) (37 Points)
Replied 03 June 2016

I request your attention to the notification 25/2012 serial no 29(h) where it reads as follows

"29. Services by the following persons in respective capacities -

(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;"

So if your client providing exempted services any sub-contractor providing services in relation to the exempted project are also exempt.

Vikas (CA) (1135 Points)
Replied 03 June 2016

I believe, the extracts and observation by Ravi needs a revisit.

Firstly, the extracts are as under:

“14. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-

(a)…

(c) low- cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

(ca) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under:

the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;
any housing scheme of a State Government.

(d)…”

Secondly, only (ca) above is with effect from 1 March 2016, whereas (c) was an existing entry.

Thirdly, there is a specific exemption provided to a sub-contractor who is performing works contract for his principal. The relevant extracts are as under-

“29. Services by the following persons in respective capacities -

(a)…

(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;”

Lastly, if all the services provided are regarded as exempted, then there is no need to obtain registration as per Notification No.33/2012-ST dated 20 June 2012.

Hope the above clarifies all the doubts.