Residential Construction Service-15 bunglows

[Sumeet Tholle]

Dear Sir,

My query is for period FY 10-11.

One of my client constructed 15 bungalows only on one big plot.

Would this fall under definition of "residential complex" and will applicable to Service Tax ?

or this will be treated as individual bunglows & hence no Service Tax applicable?

Pl. guide.

Waiting for your advice.

Thanks.

Sumeet C. Tholle, CA.

 

[Rama Krishana]

You have stated yourself that 15 bungalows have been constructed over one plot, now what the doubt remains about its taxability.?

would you like to say 15 bungalows are one bungalow?

to my mind, service is liable to tax.

 

[Sumeet Tholle]

Sir, Thanks.

But Pl. refer my query is for period FY 10-11 &

I also request your attention to CESTAT decision in the matter of Macro Marvel Projects Ltd. vs CST, Chennai. 2008 (9) TMI 80-CESTAT, Chennai. No change by Hon'ble Supreme Court also.

Sir, Pl. reply- Issue is important for my client.

Sumeet Tholle, CA.

[Rama Krishana]

Much water have been flown since than. The issue is old one and the provisions have been amended thereafter at various inetervals.

Therefore, it is doubtful to rely upon the impugned decisioin in the present situation.

However, if individual bungalow have been constructed with independent agreements with each owners as indepent residentail units you may claim exemption. But as you said it is 15 bungalows on single plot,  a difficult situation for you to get out of service tax net.

[a k subramanian]

Exact nature of contracts with the prospective buyers are to be seen  for forming an opinion on this transaction.

From the info provided it looks it is a sale of residential units to the buyers. If it is the case then it can be argued that there is no provision of taxable services provided to anyone as it would amount to service to oneself. Again it all depends on how the registration takes place. In such a case stamp duty on the whole value of (Land and Building ) would have been paid by the buyers. If land alone is registered in the name of the prospective buyers and then building agreements are entered into between the land owners and the builders then it would definitely attract ST as there is an element of service provided.

CA A K Subramanian TIRUNELVELI TAMILNADU

[YAGAY and SUN]

Service Tax is applicable on such transactions.

AI Summary

Taxability of residential construction: whether multiple bungalows on one plot attract service tax depends on contract structure and transfer mechanism.
Whether construction of multiple dwellings on a single plot attracts service tax depends on whether the activity is a construction of a residential complex or sale of independent residential units; critical factors are independent agreements with purchasers, the contractual allocation of land and building rights, the form of registration and stamp duty payment, and whether the transaction constitutes a service to oneself or a service provided to others.