Service tax on built up area alloted (in kind) by builder to land owner

[hubert fernandes]

'A” is a land owner and “B” is a Builders/Developer. Land owners agrees and conveys land to the builders/developers vide agreement for sale, for which the builders agree to allot in kind , say 1500 square feet of built up area to the land owners. Whether the allotment of 1500 sq ft of built-up area in kind to land owners as per the proposed finance bill 2010 would be subjected to service tax under “complex construction service” and if so what shall be the valuation for discharge of such service tax liability on the 1500 sq ft allotted to land owners

[Surender Gupta]

As per the proposed service tax on construction industry and builders, service tax would be levied on allotment of such 1500 sq ft built-up area. But, it is too early to discuss the details and valuation at this point of time, since after enactment, the ministry of finance / CBEC is expected to come out with some valuation provisions to simply service tax on such transactions.

AI Summary

Service tax on in-kind allotment applies to builder allotments under complex construction service; valuation rules will follow enactment. The proposed levy would apply to allotments made in kind by builders to landowners and therefore attract service tax under complex construction service, but specific valuation methodology and implementation details are not yet provided; administrative clarification and valuation provisions from revenue authorities are expected after enactment to determine taxable value and tax discharge mechanism.