Service tax to Joint venture of consturction

[Sunil M D]

Dear All,

Request you to provide your opinion on the below query.

Facts :

There is an agreement between Landowner (A) and developer (B) for construction of residential complex consisting of 20 flats.

A’s share – 40 % i.e. 8 flats.

B’s share – 60 % i.e. 12 flats.

B is receiving consideration for 12 flats

B is collecting service tax from the buyers @ 3.09%( availing the abetment of 75%)and depositing the same.

A is receiving the consideration of 8 flats.

Now the question is:

1) Who will collect and pay the service tax on 8 flats sold by A ?

2) Will there be any service tax liability on B towards service provided to A for construction of 8 flats ?

If yes, how to calculate the amount ?

3) Suppose the developer ( B ) provides other services like painting, flooring etc to the individual buyer’s, what will be service tax liability of B ?

AI Summary

Service tax on construction services: developer liable for tax on flats transferred to landowner, valued by comparables or construction cost.
The developer is liable to pay service tax on flats allotted to the landowner as consideration; valuation is by comparable sales or, if unavailable, cost of construction plus reasonable profit (a Chartered Engineer's certificate may evidence cost). Painting, flooring or similar services included in the sale price form part of the composite sale and do not attract separate service tax; if supplied after sale, the service provider owes service tax. Services provided separately with material qualify as Works Contract Service with abatement and reverse charge considerations; pure labour without material does not.