service tax on construction services

i am into construction of residential flats and on 33% of my construction receipts i am calculating service tax liability my query is whether i can take the service tax input to net off against my service tax liability

SERVICE TAX LIABILITY OF ESTATE BUILDERS [Circular F. No. V/DGST/22/Audit/Misc./1/2004, dt. 16-2-2006] 1. Service Tax was levied on "Commercial or Industrial Construction Services" and "Construction of Complex Services" w.e.f. 10-9-2004 and 16-6-2005 respectively. Further the scope of "Commercial or Industrial Construction Services" was expanded w.e.f. 16.6.2005 so as to include completion and finishing services. 2. The Board vide Circular No. 80/10/2004-ST, dated 17-9-2004 has clarified that "Estate Builders" (i.e. who gets such construction done) are not covered under the ambit of these services. It is only the hired contractors engaged by these builders who are to be taxed. In other words Service Tax is leviable only on those contractors who are engaged in construction of new residential complexes, or completion and finishing services in relation to such complexes or repair, alteration/renovation or restoration of similar services in relation to residential complexes. 3. The specific exclusion of Estate Builders in the case of "Commercial or Industrial Construction Service", through a Circular dated 17-9-2004, appears to have been considered on account of sale of commercial complex by Estate Builders as a final outcome; although the definition under section 65(3aa) read with section 65(zzzh) of the Finance Act, 1994 does not provide for such exclusion. The definitions as provided under the Act, as referred supra, are wide enough to include all such activities of a builder. 4. In a recent decision of Supreme Court in case of M/s. Raheja Development Corporation v. State of Karnataka [2005 NTC (Vol. 27)-243] = [2005-TIOL-77-SC-CT], the Hon'ble Court has clarified "that the activities undertaken by builders for construction of flat/building for or on behalf of the prospective customers for consideration in cash or deferred payment is covered under the works contract and not under sale". 5. Considering the above decision, if the construction is undertaken by the builder for prospective customer under an agreement for sale and after construction, the rights in property have been transferred to the said prospective purchasers, the activity will amount to "work contract" or taxable service is covered under the Service Tax and not sale. 6. Divergent practices are being reported by field formations and in most of the cases, builders are avoiding registration in view of CBEC Circular No. 80/10/2004-ST, dated 17-9-2004. Further, there is wide gap between the amount charged by builders from their customers for such work contract (sale) and the amount on which contractors are discharging their Service tax liability. The various miscellaneous charges like cost of the land, development charges, maintenance charges, etc. are not included in the taxable value of services provided by the assessee. 7. It is viewed that Circular No. 80/10/2004-ST, dated 17-9-2004, has no applicability with reference to "Construction of Complex Services" which was brought under service tax net only w.e.f. 16-6-2005, as an independent service. The definition of `taxable service' under section 62(zzh) includes "Any service provided or to be provided to any person by any person in relation to construction of complex, and is wide enough to include estate builders". In such cases, the tax liability is posed on both builders and hired contractors being independent service providers. 8. It is noticed that in the construction business, different practices and financial arrangements concerning - (a) promoters, developers and builders, (b) land owners, (c) contractors, and (d) buyers exist. These practices influence the `taxable value' under the construction of complex services. In all such situations, the taxable value under section 67 shall be the gross amount charged by the service provider (builder in this case) for such services provided or to be provided by him. This read with Notification No. 18/2005-ST, dated 7-6-2005 entitles a builder/contractor an abatement of 67% on the gross amount charged, which shall include the value of goods and material supplied. Further, there is no deductions/exemptions provided for computation of such taxable value in the composite contract. 9. The aforesaid view flows from the definition of the taxable service of construction of complex besides the judicial pronouncement listed above. 10. The all India tax collection under the service head of `Construction of complex service', is reportedly too low. Please initiate proactive measures to realize service tax on this service especially when only 43 days are now left in the current fiscal. 11. Action taken on the above may be communicated to us with a copy to the Member (Service Tax) on weekly basis

Please let us know whether the service tax is applicable on the cost of steel and cement issued to contractor for construction of industrial plant. This material is procured by the owner of the plant and issued as free issue

Hi Pradeep, When you are calculating service tax on 33% (i.e., you are claiming abatement) you cant avail cenvat credit

A real state developer is making a residential banglows and i booked one banglow in that. For that, i had the registration done of my plot (size40'x30") on 17th Jan. 2007. I also signed a contract with builder to construct house for me on that plot & now this month i would be getting the possession of that house. Just before the possession, builder approached me & asking for the service tax on 7.5 lacs (contract amount). They are asking for 4.08% amount on this contract money of 7.5 lacs. Till now they never mentioned anywhere & didn't asked us but now they are asking. I want to know, is it there right to collect this ? ? or they are making money out of it ? ? ?. Please help me so that accordingly i can deal with them.

sir

we undertake the construction work of industries, we had registered before as CCS thereafter we have registerd as WCT for service tax.we had undertaked the industrial work of an industry which hav asked us the claim service tax @ 4.12% from 1-4-2007 but our registration of WCT is from 31-12-2007.all our work is without steel and cement which our client provide us free of cost.

1.   now department is asking me to pay service tax @ 12.36 %

2.   we have also undertaken the site formation work , do service tax is applicabe for this type of work

I am in delima that my client which is one of the reputed company in india say that i have to pay @ 4.12%

sir please gide us

 

HEY...

if a welfare org. of employees registerd under the registrar of fims undertake project to construct flats for its members..is org. need  pay service tax 2 contractor.....it has nt paid on the ground construction is for use of member.....adive abt applicability of service tax n required action....