abatement of 75% notification 1/2006

[hubert fernandes]

The Builder during construction stage enters into an agrt for sale with purchaser .The builder pays service tax (Complex construction service) after availing abatement of 75% as per notification 1/2006 dt 1-3-2006.

One of the clauses in the agrt states that the builder during the course of construction ie before completion of the residential project, agrees to undertake extra civil works or  additional works at request of the purchaser. These extra works can be categorised as completion and finishing services.The builder before giving possession and before project completion executes these works and raises a seperate invoice.

Whether you can claim abatement as per the above refered notification  on bills raised for such extra works? if YES than what shall be the explaination for claiming abatement on such extra works? OR whether  such works being  completion and finshing services and as stated in notification 1/2006 no abatement shall be allowed and shall be taxed at 100%..

What happens if a sale takes place in a completed project and all money ie sale consideration is received by the builder post such completion, whether extra works carried by the builder on such sale will  it be taxable ? OR  being a completed project will it be exempted? If taxable then under what service shall it be taxed? (complex construction or works contract) if taxed under complex construction will such extra works qualify for abatement? or being only completion and finishing services it will be taxed @ 10.30% on enire amount

Pl would appreciate if my above queries are resolved

AI Summary

Abatement for construction services: eligibility for additional finishing works depends on whether they form part of construction.
Whether abatement under Notification 1/2006 applies to additional finishing works performed by a builder before issuance of the completion certificate. One position treats such pre-completion extra works as part of the Construction of Complex Service and thus eligible for abatement; another position treats isolated finishing contracts as standalone finishing services taxable without abatement. The discussion also notes classification issues between works contract and construction service and practical concerns about invoicing and taxation of advance payments.