VALUATION OF CONSTRUCTION SERVICE

[NAMAN DOKANIA]

What will be the valuation of Construction Service of area handed over by Developer to Landowner at the time of Completion Certificate or Occupation Certificate??

[Shilpi Jain]

Value would be the sale value of any unit in the project closer to the date of JDA less 1/3rd (deemed value of land)

[ABHISHEK TRIPATHI]

Dear Sh. Naman Ji,

Notification 11/2017 (Rate), creates a deeming provision in respect of the value of the land. In my view, deeming 1/3rd of the value is contrary to the valuation provisions. In most cases, the value of the land exceeds 33.33%. According to the notification, if your supply is INR 100, the supply of service will be 66.67 and the land value will be 33.33%. Such straightjacket approach of the notification is against the valuation provisions.

The same contention was raised in Munjaal Manishbhai Bhatt v Union of India - 2021 (1) TMI 1095 - GUJARAT HIGH COURT [I think its pending before Hon’ble Gujarat HC].

AI Summary

Valuation of construction service: deeming one-third as land value challenged as inconsistent with statutory valuation provisions.
Valuation of construction service on transfer of built-up area at Completion/Occupation Certificate involves whether the taxable service equals the sale value of a comparable unit less a deemed land component of one third. One view applies the one third deeming rule to allocate the land portion; another contends this fixed ratio conflicts with valuation provisions because actual land value often exceeds one third, creating a recurring compliance dispute for joint development arrangements.