Contract terms are as follows : 1 st party : Has Land
2nd party ( MY CLIENT ) : Is handed over that land for constructing flats & selling to prospective buyers
I want to know implications of taxes to be borne by my client as in the contractor here is it wct (Is Land considered as goods ) and service tax on wc service or it will just be service tax on construction service .
plz do reply on this post or my email id aa75143 @ gmail.com
ans depends on what system adopted.
in wct on sale of flat - 70+40-vat
or on entire const value - 5.5 % Tax
and service tax with 70% abetment
Ms Preity ,
This may be a case of joint development of land and construction of flats.The land owner may sell his land to the builder. Which is simple as the builder becomes the sole constructing and selling agency .For various purposes land owners enter into joint agreement of development. In this method land is exchanged with flats of equal value.By entering into a joint developmnet expenses of land registration is saved and also some black money adjustments are easily done.In many states where sales tax departments are not familiar with joint development agreements VAT and ST are also avoided to the extent of value of the land.
In priciple, and also as per instructions issued to the officials,the exchange value decided between the land owner and the builder is to be accounted at their market value as turnover of the builder. For Ex : A offers a land of worth Rs1 crore to B to build apartments. B constructs 20 apartments on that land and sells each for Rs 20 lakhs.He agees to give 5 flats to A in exchange for the cost of land. He receives Rs 3 crore as sale proceeds from others. Now he should ad Rs1 crore to his turnover as the exchange value and pay VAT and ST on Rs4 crore as per rules..........mjk
CAclubindia
