Step by Step answer to your query can be given as under (only Service Tax part touched): -
Construction of complex” means — (relevant extracts only)
a) Construction of a new residential complex or part thereof;
Where, “Residential complex” means any complex comprising of —
i. a building or buildings, having more than twelve residential units;
2) Conclusion: - From the above it is clear that although construction of residential complex is a taxable service, however, if the residential complex consists of less than or equal to 12 residential units, then the same would not be liable for the purpose of service tax.
Further note that definition of Residential complex specifically excluded a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for use as residence by such person.(i.e, construction for self consumption is not liable to service tax)
3) It is not very clear whether the residential complexes would be transferred to the developer after the development activity took place or before its start. Thus, I am presenting two scenarios for your clarity: -
(A) BUILDER MODEL: -
Here the owner of the land SELLS the land to the developer & the developer makes construction activities on his own behalf.
In this case, as per the judgment of Allahabad High court in case of Assotech Reality P. Ltd., Vs. State of UP 2007 (007) STR 0129 (All.) if the agreements are for the purpose of sale of the completed building then the same would be not considered as works contract (thus NO SALES TAX applicable) or service (thus NO SERVICE TAX applicable).
Further, the decision of Honorable Gauhati High Court in case of Magus Construction Pvt. Ltd. and another Vs. UOI 2008 (11) STR 225 held that where the activity of construction is not undertaken for or on behalf of another person, instead it is done for one self the same would not be subject matter of service tax.
The idea behind the above two judgments are: - In the absence of a service receiver, the developer cannot be said to be rendering taxable service
Consideration received in Installments: -
Assotech Reality P. Ltd., it is observed that “The payment schedule would not alter the transaction. The right, title and interest in the construction continue to remain with the builder.” Accordingly in a situation where the construction is not undertaken for and on behalf of prospective buyers, even though the consideration is received before the completion of construction (i.e, in installments) will not change the taxability of the transaction.
(B) DEVELOPER MODEL
Here the Owner of the land keeps the land with himself & gives a contract to the developer to develop land for him.
In this case, where the sale deed is not executed but only agreement to sell for undivided portion of land and construction agreement is executed then the property in goods involved in the execution passes to the purchaser through accession, this will become a works contract & hence liable to VAT ( K. Raheja Development Corporation v. State of Karnataka 2006 (3) STR 337 (S.C.))
In this case Service Tax would also be applicable as there is service receiver for which Abatements is also Available: -
1) If the Agreement to Sell with the customer includes value of Land as well as Construction cost, then an abatement of 75% is allowed. For the purpose of calculating the service tax, the taxable value will be treated at 25% of the Agreement to Sell value. Notification No. 29/2010-S.T., dated 22-6-2010
2) If the Agreement is for construction service only i.e, excluding the value of land then an abatement of 67% is allowed. For the purpose of calculation of service tax, the taxable value will be treated at 33% of the value of the construction. Notification 1/2006 dated 01-3-2006 will be applicable.
Note: On both the above options Cenvat Credit is NOT allowed to be claimed.