Residential complex tax does not cover individual flats or row houses built as separate residential units.

Construction of individual residential flats, units or row houses was held outside the tax net for construction of a residential complex under the service tax scheme. For the period before 1 July 2012, the levy applied only where the project comprised more than 12 residential units and satisfied the statutory attributes of a residential complex. From 1 July 2012, the declared service for construction intended for sale still did not cover individual residential units, especially where the scheme contained an exemption for a single residential unit. On the admitted facts, the assessee built separate residential units, not a taxable residential complex, and an approved plan for multiple units on a large plot did not change that character.

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Issues: Whether construction of individual residential flats, units or row houses is taxable as construction of a residential complex under the service tax provisions applicable before and after 01 July 2012.

Analysis: For the period prior to 01 July 2012, the levy under the service tax provisions applied to construction of a residential complex comprising more than 12 residential units with the other statutory attributes of a residential complex. From 01 July 2012, the taxable declared service covered construction of a complex, building or civil structure intended for sale, but the statutory scheme and the exemption for a single residential unit showed that individual residential units were not meant to be brought to tax as a residential complex. On the admitted facts, the appellant constructed individual residential houses or row houses, each constituting a residential unit, and not a taxable residential complex. The approved plan for multiple individual units on a large plot could not, by itself, convert such units into a residential complex for service tax purposes.

Conclusion: Construction of the individual residential units was not taxable as construction of a residential complex. The demand and penalties were unsustainable and the appeal was allowed.

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