Service tax on completed consturction

[Guest]

I am seeking your valuable advice to clarify my doubt regarding the service tax in construction.
I was talking to different people and there is an difference of opinion.

Below is my case:

We are going in for an agreement with builder for ready to move flat in a building in western suburb of mumbai.
1) The said property is already constructed and people are staying from last 1.5 years.
The application for OC was already put up in Sept 2013 and still awaiting for OC certificate.
2) Builder is demanding service tax & vat.

3) I have come across one notification from Service tax Notifcation M.F.(D.R.) order no 1/2010) called as 'Service Tax (removal of difficulty) and as per that
besides government authorities others competent authorities like Architech/CA / legal surveyor can issue he completion certificate.

4) We have the competition certificate from Architect/ legal surveyor.

With the ref. of above notification & completion certificate by architect do we have to still pay the service tax to builder or no?

Looking for your positive response.

Regards,

Amol Raut

[Rajagopalan Ranganathan]

Sir,

According to Section 66 E (b) of Finance Act, 1994 construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion-certificate by the competent authority.

Explanation appended to the above provision states that for the purposes of this clause,-

(I) the expression "competent authority" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:––

(A) architect registered with the Council of Architecture constituted under the Architects Act, 1972; (20 of 1972.) or

(B) chartered engineer registered with the Institution of Engineers (India); or

(C) licensed surveyor of the respective local body of the city or town or village or development or planning authority.

Therefore when the law in force do not prescribe issue of 'Completion Certificate' then the others prescribed under clause (A), (B) and (C) can issue such certificate. You have stated that the application for OC was already put up in Sept 2013 and still awaiting for OC certificate. Therefore it indicates that the law time being in force prescribes some authority to issue the completion certificate. Therefore the certificates issued by persons indicated in the explanation will not be accepted by Department and the Department will demand service tax. This is the reason you contractor is demanding service tax. However you can ascertain whether according to local law there is an authority to issue completion certificate or not if there is no such authority is prescribed by law then you can claim the benefit on the basis of certificates issued by an Architect, Charted Engineer or licensed surveyor. This is my opinion.

AI Summary

Service tax on construction: taxable unless entire consideration follows issuance of competent authority completion certificate. Construction services are taxable unless the entire consideration is received only after issuance of a completion certificate by the competent authority. If local law prescribes a government or municipal authority to issue the certificate, certificates from architects, chartered engineers or licensed surveyors will not qualify; if no statutory authority is prescribed, certificates from those professionals may be relied upon to claim the exemption.