Construction of
industrial and commercial buildings was already subject to service tax. The
Government included residential complexes also within the ambit with effect
from June 16, 2005.
Relevant provisions
Section 65(30a)
of the Act, as inserted by the Finance Act, 2005 (“Act”) defines “construction
of complex” as follows:
“Construction of
complex” means-
a.
construction of a new
residential complex or a part thereof; or
b.
completion and finishing
services in relation to residential complex such as glazing, plastering,
painting, floor and wall tiling, wall covering and wall papering, wood and
metal joinery and carpentry, fencing and railing, construction of swimming
pools, acoustic applications or fittings and other similar services; or
c.
repair, alteration, renovation
or restoration of, or similar services in relation to, ‘residential complex.’
The term ‘residential
complex’ is defined in section 65(91a) of the Act as follows:
“Residential complex” means any complex comprising of-
i.
a building or buildings, having
more than twelve residential units;
ii.
a common area; and
iii.
any one or more of facilities
or services such as park, lift, parking space, community hall, common water
supply or effluent treatment system
located within a premises and the
layout of such premises is approved by an authority under any law for the time
being in force, but does not include a complex which is constructed by a person
directly engaging any other person for designing or planning of the layout, and
the construction of such complex is intended for personal use as residence by
such person.
Explanation: For the removal of doubts,
it is hereby declared that for the purposes of this clause, -
a)
“personal use” includes
permitting the complex for use as residence by another person on rent or without
consideration;
b)
“residential unit” means a
single house or a single apartment intended for use as a place of residence.
What is the taxable service?
Section 65(zzzh)
of the Act defines the taxable service as any service provided or to be
provided to any person, by any other person in relation to construction of complex.
Important:
With effect from
July 01, 2010, an Explanation has been inserted below sub-clause (zzzh) of
section 65(105) by the Finance Act, 2010 to clarify that unless the entire
consideration for the property is paid after the completion of construction
(i.e., after issuance of completion certificate by the competent authority),
the activity of construction would be deemed to be a taxable service provided
by the builder/promoter/developer to the prospective buyer and the service tax
would be charged accordingly.
Value of the taxable service
Under section 67
of the Act, the value of taxable service is required to be computed in the
following manner:
·
Where the provision of service
is for a consideration received wholly in money, the value shall be the gross
amount charged by the service provider for provision of service. The term
‘consideration’ includes any amount payable for the services provided or to be
provided. The term ‘gross amount charged’ shall include (i) such amount
received towards the service before, during and after provision of such
service; and (ii) payment by cheque, credit card, deduction from account and
any form of payment by issue of credit notes or debit notes and book
adjustment.
·
Where the gross amount charged
is inclusive of service tax payable, the value shall be such amount as, with
the addition of tax payable, is equal to the gross amount charged.
·
Where the provision of service
is for a consideration which is not wholly or partly consisting of money, the
value shall be such amount in money as, with the addition of service tax
charged, is equivalent to the consideration.
·
Where the provision of service
is for a consideration which is not ascertainable, the value shall be the
amount as maybe determined in the manner prescribed in the Valuation Rules.
Rate of Service Tax
12.36%
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