Service Tax on Builders

[Anup Kumar Grover]

Sir,

One of the Builder, taken a collaboration agreement for Rs.10 crore, completed construction of B+GF+FF+SF+TF,

Owners share was FF and rest of builder's Share. Cost of Construction Rs.8 Crore.

Thus, total cost of Builder Rs.10+8 crore= Rs.18.00 Crore. Whether Service Tax be charged as 

B+GF sold for Rs.8 Crore, = 8 X 30% X 12.36% = Rs.29.66 Lac

SF sold for Rs.6 Crore =  6 X 30% X 12.36% = Rs.22.25  Lac

TF sold for Rs.6 Crore 6 X 30% X 12.36% = Rs.22.25  Lac

If consideration received before issue of completion certificate from the proposed buyer.

 Whether it will be permissible under Law, when in Sale Deed, a segregation be made for value of proportionate land transferred and value of Construction cost on their floor trfd. Then levy Service Tax and VAT on value of cost of construction only and abatement of 60% be taken.

AI Summary

Service tax applicability on pre-completion floor sales in Rs. 10 crore agreement; potential abatement and VAT considerations. A builder entered a collaboration agreement for Rs. 10 crore, constructing multiple floors with a total cost of Rs. 18 crore. The query concerns the applicability of service tax on sales of certain floors before the completion certificate is issued. The discussion outlines that service tax may apply to the construction cost, with potential abatement, and VAT on the construction value. The reply highlights the complex nature of the situation, suggesting service tax could be levied on the construction and sale amounts, depending on the agreement's terms, and anticipates disputes and varying interpretations by tax authorities.