WHAT IS SERVICE TAX PAYABLE?

[rajkumar shukla]

X, a builder cum owner of land constructed multi-storeyed residential flats by hiring labours, valued at Rs. 10.73 crores as ascertained by government approved valuer in May,2010. According to certificate issued by said Architect cum Valuer, construction started in February,2008 and 80% work was completed by May,2010.The builder submitted information to this fact in Range office in July,2010 along with above certificate of valuer when explanation regarding deemed service provision was added in the definition of construction service. Remaining 20% construction work completed after july,2010. Builder receives 80% of flat price from prospective buyers after July,2010 and propose to take rest 20% at the time of registry in April,2010. On what amount service tax is payable.

[rajkumar shukla]

it appears that the experts take up the questions relating to theory better rather than numericals

[rajkumar shukla]

No takers for this query.Is Mr Pradeep khatri listening?

[YAGAY andSUN]

The concept of the Deemed Services was stayed by the High Court of Mumbai in the case of Maharashtra Chamber of Housing Industry, wherein, an interim stay was granted on the grounds of questioning the constitutional validity staying the imposition of service tax on for the said amendment made in Finance Bill 2010, further the judges ruled that “ No coercive steps will be taken against the developers for recovery of service tax in relation to the provisions in question”.

Further, right in the property accrues to the owner only on execution of Sale deed and not otherwise. If advances are paid before 1^st July 2010, then there is no service tax liability. Such advances are specifically exempted by Notification 36/2010 dt 28/06/2010.However any payment of advance should also not be impacted, since the matter is stayed by Mumbai High Court.

If the Agreement to Sell with the customer is for the value that also includes value of Land as well as Construction cost, then an abatement of 75% is allowed. For the purpose of calculating the service tax, the taxable value will be treated at 25% of the Agreement to Sell value. Eg: Agreement to Sell Value (Including Land Value) – Rs. 50,00,000/-. The value for the purpose of computing service tax will be 12,50,000 (25% of 50,00,000).  The service tax amount will be Rs. 1,28,750/-. The 75% abatement is available effective 1^st July 2010. Refer Notification No. 29/2010-S.T., dated 22-6-2010.

[rajkumar shukla]

Thanks but the main question is whether the fact of completion of 80% work without taking any advances from customers before introduction of deemed manufacture concept will in anyway set off the service tax liability.in other words, Is service provider entitled to pay service tax on the rest of construction only, valuation aspect and abatements notwithstanding?

[gorantla nagaraju]

i am telling that service tax payable only 80% amount 

AI Summary

Deemed construction service: stay and advance exemption affect whether tax attaches only to post-amendment construction work. Question whether service tax applies where a builder completed the majority of construction before the amendment creating deemed construction service and received payments after; a High Court stay suspended enforcement of the amended provision and a government notification exempted advances paid before the effective date. For agreements combining land and construction, a statutory abatement reduces the taxable value of the agreement for service-tax calculation. The core issue is whether prior completion limits liability to subsequent work, aside from valuation and abatement treatment.