Service Tax Liability on Building Construction

QUERY RELATED TO SERVICE TAX WITH ANSWER

1. M/s. XYZ Private Limited purchased land in the year 1994 and entered into an development agreement with M/s. ABC Private Limited. M/s. ABC Private Limited constructed buildings over the said land. M/s. XYZ Private Limited charged 200/- as land cost and the balance Sale Consideration was been collected by M/s. ABC Private Limited.

The buildings were completed by the year 2002 and Completion Certificate obtained from the CONCERNED Municipality.

There are some ready flats unsold as on 01-07-2010. Will Service Tax be charged on these flats and if yes, then at what rate?

Ans) Since the construction was complete before 01-07-10 no service tax liability arises.

2. A) M/s. ABC Private Limited purchased land in the year 1994 - 1998 and constructed buildings over the said land for the sale consideration collected on these flats. The buildings were completed by March 2010 and Completion Certificate obtained from the CONCERNED Municipality.

In the said project also there are some ready flats unsold as on 01-07-2010. Will Service Tax be charged on these flats and if yes, then at what rate?

Ans) Since the construction was complete before 01-07-10 no service tax liability arises.

B) Some buildings which were completed before 01-07-2010 and the intending flat purchasers are residing in their respective flats.

The Completion Certificate from the concerned Municipality had been applied but till date it has not been obtained. But Completion Certificate from the L.B.A. had been obtained for these buildings.

There still are some ready flats sold after 01-07-2010. Will Service Tax be charged on these flats and if yes, then at what rate?

Ans) Since the construction was complete before 01-07-10 no service tax liability arises. In this case even though construction completion certificate has not been received no service tax liability will be there.

C) There are some buildings which are under construction as on 01-07-2010, where some flats have already been booked before 01-07-2010 and some flats have been booked after 01-07-2010.

What percentage of Service Tax be charged on these flats and from when?

Ans) Service tax will be collected on the collection made after 01-07-10. No service tax liabilty will arise on the advance payment received before 01-07-10.

Does the assessee need to charge Service Tax on the amount received before 01-07-2010 as an advance towards the under construction flats?

Ans) Service tax will be collected on the collection made after 01-07-10. No service tax liabilty will arise on the advance payment received before 01-07-10.