Service tax on Joint Venture activity - development of residential plots

[M. R. Nadkarni]

A developer enters into joint venture with the owner of the land to develop the plots for residential purpose and to sell them to the purchasers. Developer will bear entire cost for developing the plots. The developer in turn will be asigned 60% of the plots, sale proceeds of which will be given to the developer by the owner of the land. As there is no construction activity, there seems no service tax chargeable by the developer. Is there any other tax issue? Looking forward for early advice. Regards.

AI Summary

Service Tax Implications in Joint Ventures: Clarifying Transaction Nature Without Construction Activity Involved A developer and a landowner form a joint venture to develop and sell residential plots. The developer funds the development and receives 60% of the plots, with sale proceeds paid by the landowner. The query concerns whether service tax applies, given the absence of construction activity. A respondent notes the arrangement's complexity, questioning its classification as a joint venture since profits are not shared but rather proceeds are paid. The respondent suggests that the nature of the transaction must be clearly defined before addressing the service tax implications, as it could have significant consequences.