Liability to pay services tax on development rights received by BMC

[vishwanath shetty]

Hello Experts, 

I would like to known the following, 

one of our client is involved in construction of residential and commercial buildings, 

they had taken up a project of  Slum Rehabilitation Authority (SRA ) were they had to build flats in a building  for the slum dwellers/tenants and to provide 35 extra flats. against this they had received Development rights.

Now department is saying to pay the service tax on the development rights received by them for providing 35 extra Flats, the amount of consideration is been calculated on the ready reckoner rate of the flats.

Are they liable to pay service tax on the development rights received by them? Please advise

[Shilpi Jain]

There is no liability of service tax on development rights. See the decision of DLF which is now pending before SC.

AI Summary

Development rights and service tax: no service tax liability on development rights received for additional flats under SRA. Whether development rights received as consideration for constructing allotted flats in an SRA project attract service tax; the department valued extra flats at ready reckoner rates and sought service tax, while the taxpayer contends that transfer of development rights for such construction is not a taxable service and thus no service tax liability arises.