Service tax on Pucca labour quater construction

[ramkishore gupta]

Please let me know the impact of service tax on Payment received for Construction or renovation done for Pucca labour quarters not meant for sale by a tea industries.

[KASTURI SETHI]

Dear Sir,

From whom payment is received ? If without sale, are these quarters for personal use ?

[ramkishore gupta]

Payment is received by us from Tea Company and the quater are meant for the use of labour of tea company and is not for sale

[Rajagopalan Ranganathan]

Sir,

As per 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" is a declared service and liable to service tax. In your case the houses were constructed by you and handed over to the receiver of the service for accommodating their labourers. The houses were not rented by you to the tea company. Only when a house is rented out for personal use and not for commercial use then the rent is not liable to service tax. In your case you are only constructing labour quarters. Therefore, in my opinion, you are liable to pay service tax.

[YAGAY and SUN]

In our veiw also, these transaction do fall under the ambit of service tax.

[KASTURI SETHI]

Sh.Gupta Ji,

I support the views of both experts. I further express my views as under:

In this situation, all the three parameters are qualified:-

. (i) Service Provider is there.

(ii) Service Receiver is there.

(iii) Consideration is there.

[Ganeshan Kalyani]

All the three parameters in my view is there in the query. Thanks Sri Kasturi Sir for replying in a lucid way.

AI Summary

Service tax on construction services: paid construction and handover of labour accommodation is taxable when consideration is received.
Construction of pucca labour quarters paid for by the tea company constitutes a declared service under Section 66E(b) and is chargeable to service tax. Liability arises because the provider constructs and hands over accommodation to the service receiver for labour use, with consideration received, distinguishing the transaction from exempt personal residential rent.