Construction of Residential Complex Service: tax liability arises only from July 1, 2010, relieving earlier period of levy

Construction of Residential Complex Service was held to attract service tax prospectively only after the Explanation to its definition came into force on 01.07.2010; therefore activities carried out during October 2009June 2010 were not taxable. The Board circulars cited corroborate that construction services by builders/developers prior to 01.07.2010 were not taxable under the earlier circular position, and on that basis the impugned demand was set aside and the appeal allowed.

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Issues: (i) Whether service tax is payable by the builder/appellant for construction of residential complexes for the period 01.10.2009 to 30.06.2010.

Analysis: The statutory definition of Construction of Residential Complex Service under Section 65(105)(zzzh) was amended by the insertion of an Explanation effective 01.07.2010. Prior to that amendment, agreements for construction that constituted works contracts were not intended by the statute to be taxed as builders' service simplicitor; the Explanation extended chargeability prospectively to include transfer-related contracts by builders. Administrative clarifications in Board Circular Nos.108/02/2009-ST and 151/2/2012-ST support non-chargeability of builder/developer services prior to 01.07.2010; relevant Tribunal precedents applying the Explanation prospectively were followed.

Conclusion: Service tax is not payable by the appellant for the period 01.10.2009 to 30.06.2010; liability arises only from 01.07.2010.

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