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Service Tax on Construction

CABALRAM PANDEY

Dear Professional Colleagues

Please guide me on the following issue:-

A builder/developer is constructing building and starting booking of flats before completion of construction, the activities flows in following manner:

01-01-2010  Date of construction started.

01-01-2011 Date of First Booking of Flat

Stage of completion        Date of construction         date of realisation

4th Floor                        01-04-2012                      31-05-2012 (50 percent of Flat Value)

10th Floor                       01-04-2014                     31-05-2014 (90 percent of Flat Value)

Possession by

Deed of conveyance        01-10-2014                       01-10-2014 (100 percent of Flat Value)

Based on the above please guide me that, what will be the point of taxation for each construction stage, as it is a continuous supply contract. 

  Thanks in advance

Balram Pandey

Guidance Sought on Taxation Points for Continuous Supply Contract in Building Construction Under Accounting Standard 7 A builder is constructing a building and begins booking flats before the construction is complete. The construction and booking timeline is as follows: construction started on January 1, 2010, first booking on January 1, 2011, with various stages of completion and payment from 2012 to 2014. The query seeks guidance on the point of taxation for each construction stage in a continuous supply contract. Responses suggest taxation points could be based on invoicing, completion, or payment. Revenue can be booked on an accrual basis for income tax and on a completion basis for service tax, following Accounting Standard 7. (AI Summary)
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