Service tax on land development

Dear Pragya, In my point of view, you are required take a expert opinion before discharging service tax. Because of following reasons 1. There is no clear picture, to tax on landlords share (when and on what value) 2. Recently CBEC issued a clarifications with respect to Circular 151/2/2012 dated 10.02.2012 vs. Education Guide. Where education guide say value to be considered for payment of ST shall be VALUE OF LAND but circulars says that we should consider SIMILAR FLAT VALUE. But this clarifications may not be valid as refrerred circular was issued prior to 01.07.2012. To answer your question "whether can I take land deduction?" It depends on valuation you would adopt 1. 26/2012 abatement scheme- ST to be paid on 25% of total consideration inclding land value. 2. Works contract valuation - ST to be paid on 40% of Construction cost (excluding land value). In both option, You can avail credit on input services and capital goods.

If land Lord sell his portion after oc then question of stax

Hi Prakash,

Thanks for your reply. Regarding valuation again I have a doubt- 

1. We can take value after abatement of 75%. 

2. Or instead of taking abatement benefit can we claim land dedcution ?

Hello Ketan,

Sorry but I did not get you. Please explain.

If possible tell land lord to sell his portion after Receiving occupancy certificate then no question of service tax

Dear Pragya, Before taking decision on valuation, we have to work out total ST payable in both cases, then take whichever is beneficial to you. I could share a format for calculation of ST tomorrow.

there are 3 category of transations.

1. Construction service provided by developer/builder for consideration of land

2. Builders sells his part of flats to his customers

3. Land owner sells his part of flats to his customers.

 

If we are taking about 1st transaction, then developer is liable to pay service tax by collecting the same from land owner adopting any one valuation option told earlier. For this, there is question of flats completed before or after.

 

However, in last 2 transactions, if we sell flats before completion - service tax will be applicable.

If we sell after completion (sale of immovable property) - No ST payable.

 

/articles/service-tax-implications-on-land-development-agreements-between-landlord-and-developers-26220.asp