25% or 30% Abatement applicable to Developer

[JIGAR SHAH]

With reference to the Service Tax Notification No. 09/2013 Dt. 08^th May 2013

Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, except where entire consideration is received after issuance of completion certificate by the competent authority,-
(a) for a residential unit satisfying both the following conditions, namely:– (i) the carpet area of the unit is less than 2000 square feet; and (ii) the amount charged for the unit is less than rupees one crore;	25%
(b) for other than the (a) above.	30%

Our Client has plotting scheme and he is selling plot after developing plot area by the activity such as filling with clay the deep area up to the main road surface, soil stabilization, land reclamation work, Horizontal drilling for the passage of cables or drain pipes, making the compound wall, marking the plot area etc.

Actual size of carpet area of Plot is 2100 sq feet but as per the plan passed with competent authority residential unit can be constructed for 1000 sq feet. So as per the Service Tax Notification No. 09/2013 Dt. 08^th May 2013 which percentage of abatement is applicable (whether 25% or 30%) on selling of above mentioned Plot?

[KASTURI SETHI]

If your client has two separate agreements for plot measuring 2100 Square Feet, ST will be paid on 25% of the gross amount. If agreement is one, ST will be paid on 30% of the gross amount. To avail abatement of 75% of gross amount, the seller will execute two agreements with two separate persons.

[JIGAR SHAH]

Thank You for the prompt reply.

AI Summary

Service tax abatement eligibility hinges on residential-unit designation and separate agreements, determining applicable abatement rate.
Service tax abatement depends on whether the transferred unit qualifies as a residential unit under the notification's carpet-area and price criteria and on the contractual form of the sale; the advisory states that a single agreement for the plot yields the higher abatement basis, whereas executing separate agreements may permit the lower abatement treatment.