Service Tax on Developers

[Mehul Pandya]

Dear Experts,

If developer purchase a land on which he can build 15 low cost houses upto 8 Lakh rupees each. Now he is planning to enter into land sale agreement first and then he will enter into construction agreement with different house purchaser. (1) Can he get service tax exemption of a single residence house designed for use for a single family under Service Tax rules ? and (2) if purchaser is taking subsidy approved from the bank under Pradhan Mantri Awas Yojana at the time of taking loan. in this case can developer get service tax exemption ??

Thank you

[DR.MARIAPPAN GOVINDARAJAN]

In my view you cannot get exemption.

[KASTURI SETHI]

Dear Sir,

Exemption has been granted to the following vide Notification No.9/16-ST dated 1.3.16 amending Notification No.25/12-ST.

(v) in entry 13, after item (b), the following items shall be inserted with effect from 1st March, 2016, namely -

“(ba) a civil structure or any other original works pertaining to the ‘In-situ rehabilitation of existing slum dwellers using land as a resource through private participation’ under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers.

(bb) a civil structure or any other original works pertaining to the ‘Beneficiary-led individual house construction/enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;”;

I have not gone through terms and conditions of contract/agreement. You may examine the contract whether the activity is covered under this notification or not.

You may see whether you are

 

[Mehul Pandya]

I have difficulty in interpretation that all 15 house will be purchased by different 15 families in that way is it called a single residence unit constructed for one family ? and exemption can be claimed ?

[Mehul Pandya]

for your information sir, No agreement has been made till now.

[KASTURI SETHI]

Will you let me know your profile please?

[Mehul Pandya]

Advocate

[KASTURI SETHI]

Dear Sir,

To avail exemption from ST in this case, builder/contractor must get permission from Govt. of India, Ministry of Housing Development, N.Delhi, See entry No.13 (ba) and (bb) in Notification No.25/12-ST as amended and go through the web-link given below.

 

PradhanMantriAwasYojana

www.mhupa.gov.in/writereaddata/01_PMAY_Guidelines...

AI Summary

Service tax exemption linked to PMAY requires project fit with in situ or beneficiary led categories and government permission. Whether a developer constructing multiple low cost houses can claim a service tax exemption for single residence houses and whether purchaser subsidy under PMAY affects that exemption. An amendment to the service tax notification creates exemptions for in situ rehabilitation of existing slum dwellers and beneficiary led individual house construction under PMAY, but entitlement requires that the activity fit those categories, examination of contract terms, and obtaining permission from the central housing ministry.