Service tax applicability on sale of flats

[Guest]

We have constructed a residential complex consisting of more than 12 units after 16/6/05. All material was directly procured by us & labour also engaged directly. We hired various sub contractors for finishing work. Plz clarify whether service tax is payable on sale of such flats or earlier.

[Surender Gupta]

Your query is not indicating the important aspect thay under what capacity you are engaged in such activity. Kindly refer to letter issued by DGST as F. No. V / DGST/ 22/ Audit / Misc. / 1 /2004, dated 16-6-2006 which refers a case decided by the Apex court in the matter of sales tax in the case of M/s Raheja Developmen corporation v. State of Karnataka [2005 NTC (Vol 27) - 243. Because of this letter and decisions various issues has been arising. Therefore, the issue of taxablity of the construction services is to be decided on case to case basis and based of detailed aspect of the query.

[Guest]

Service tax is payable by the contractor and the contractee , in your case as you are the contractee no service tax is laiable. on sale of the house only relevant stamp duty is applicable

AI Summary

Service tax on real estate sales: liability depends on party capacity and case-specific contractual arrangements. Applicability of Service Tax to sale of flats depends on the capacity in which the developer acts and the factual and contractual matrix; taxability of construction services is case-specific, with liability generally resting on the service provider (contractor) while the purchaser/contractee's exposure depends on whether they acted in a taxable-service capacity, and where not, sale-related stamp duty remains the relevant charge.