Service tax on

[hubert fernandes]

the finance bill has extended the scope of prevailing service "complex construction" by introducing an explaination that unless the entire payment is made by the prospective buyer to the developer/builder the activity of construction would be deemed to be a taxable service and charged accordingly. If in a ongoing project under construction (pending occupancy) a customer has booked an apartement under an registered agrt for sale and has paid a part consideration of say 3 lac as against the total sale price of 10 lac. whether the 3 lac paid would be exemped and 7 lac would be subjected to service tax. however the board Circular No. 108/02/2009–ST dt 29.01.209 which states that"It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of ‘self-service’ and consequently would not attract service tax" can we avail the benefit of the above circular and would the enite 10 lac be exempted ? and only sale agrt ented post the expalination would be subjected to service tax.

AI Summary

Taxability of construction services: partial payments before project completion risk being treated as taxable unless clarified.
The finance bill's explanation treats construction as a taxable service unless the buyer makes full payment; Board Circular No.108/02/2009-ST had treated pre-sale-deed construction services as self-service and non-taxable until completion and full payment. The reply disputes that projects without a completion certificate at levy can be deemed complete, warns of disputes over amounts collected before the levy, and advises builders to obtain completion certificates or seek a clarification/exemption from the central government.