Is service tax or vat payable in the following situation?

Queries 365 views 2 replies

CA Sanjay Kumar

CA Practice

24 Points Joined January 2014

Mr. A owns a first floor flat in a plot on which ground floor , first floor and second floor is constructed. The ground and the second floor is with Mr. B. Mr. A and B enter into a collaboration agreement with a builder. As per this collaboration Mr. A is to get the newly made first floor and then some cash. The building is under construction presently. Mr. A wants to sell the first floor to Mr. C. Kindly confirm whether any service tax or vat is payable by Mr. C. The entire consideration for the flat is made by Mr. C to Mr. A and nothing is paid to the builder.

Replies (2)

CA RAHUL PATEL

PARTNER

57 Points Joined November 2010

According to me there is no taxability so far price received by Mr A from Mr C. But service tax will certainly apply in relation to cash and value received by Mr. A from Builder under declared service. No question of VAT applicability in either case.

CA Shraddha Vora

Teamhead

149 Points Joined July 2013

Sir,

Please refer to the definition of service contained in

Section 65B (44) - "service" means any activity carried out by a person for another for consideration, and includes a declared service but does not include

an activity which constitutes merely

(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

Thus, sale of flat by one person to another is a mere transfer of title in immovable property and will not be taxable. However, the transaction between the builder and Mr. A is taxable as a works contract. Treating the same as construction is unrealistic as is it the customer who is appointing teh builder and land value is not included in value of taxable service as land belongs to Mr. A.

Hope this clarifies.