Service tax on 12 unit residential complex.

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K. meharnath

prop

141 Points Joined November 2009

Dear members,

Kindly clarify my query at the earliest.

I am the owner of a site of 8100.00 sft in bangalore, and there is a residential complex being built on this land, wholly designed, drawn, surpervised, iand constructed by me, by just giving labour contract only. There are 12 residential units in this complex.

Kindly clarify the following.

1. Is service tax applicable for the potential purchasers of the units, who enter into an agreement and pay before completion of the complex.

2. Is service tax applicable to those purchasers if I sell them after completion.

3. If so, on what basis of the recent amendment and also what is the rate of service tax.

4. Since I am the land owner and as well builders, am I not exempted from service tax, since if I bill in the name of myself then the service is for myself and there is no tax, and if it is for the pottential purchaser, then the work is for his personal use, and for personal use there is no service tax.

advance thanks very much

meharnath.

Replies (2)

CA Unnikrishnan Nair N

Chartered Accountant

2083 Points Joined February 2011

1. As per present law , more than one unit is residential comples.

2. Liability to pay serice tax is on the builder/developer/conatrctor. But you can collect tax from ultimate buyers of the flat.

3. You have tax liability if you enter in to conatruction agreement with the buyer.

4. Eventhough it is agreemtnnt to sell, if you rceive any money before you get completion certificatem you are liable to tax.

5.If you award labor conatrct, he is also liable to tax. But tax paid by him is cenvat credit for you.

K. meharnath

prop

141 Points Joined November 2009

Dear unni krishnan,

Thank you very much for a rocket fast reply. Kindly clarify a litle more.

1. Supposing I have entered into agreements of this 12 unit residential complex when the law was mentioning so, i.e., before the law came into force from 01st august 2012, and I have also commenced construction with the help of a commencement certificate before june 2012. What am i to do.

2. Since I am the land owner and as well designer and builder, am I not exempted from service tax, since if I bill in the name of myself then the service is for myself and there is no tax, and if it is for the pottential purchaser, then the work is for his personal use, and for personal use there is no service tax.

3. The labour contract service tax obligation is for the labour contractor and not me right? I simply have to pay the cost I have agreed for and that's it, as per the labour contract agreement.

4. Any other possible way to avoid service tax?

thanks in advance again,

mehar.