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.

[sanjeev bajaj]

It is very typical situation. it can be considered in following ways:-

Firstly,     It has three elements.

1. There is construction of building thru collaboration agreement although the consideration is in kind. Hence, the services as works contract leviable on builder on Rs. 8 crore as service provider. other terms be seen in respect of reverse charge.

2. The land owner has received Rs. 10 cr and Rs 8cr.(construction element) in liey of b,gf ,sf & tf which can be treated as bookin/advance towards slae of these floors. Hence sT can be levied as declared service.

3. If the builder sell the same than it can be treated as transfer of right of booking.

 

Secondly,  If the agreement is in such a way that The land owner has given rights in land or trf. of certain floors in consideration of Rs. 10Cr. than the ST may be as follow:-

1. ST may be levied on the construction amount pertaining to FF as the builder being service provider.

2. ST on sale of other floors will be like services as per declared services on sale amount in either way on service portion or takes as abatement.

Thirdly, there may be different options depending on the basis of clauses of collaboration agreement or some other agreement.

In my opinion, there will lot of disputes and department will act in a manner to fetch maximum revenue.

 I expect different views from the readers and request them to come up with suggestions and ideas so that some conclusion can be reached

AI Summary

Service tax on construction and booking rights: allocation of land and construction value determines taxable service treatment. The collaboration arrangement yields three taxable elements: the builder's construction services (taxable as works contract on the construction portion), the landowner's receipt of booking advances (taxable as declared services), and transfers by the builder treated as transfer of booking rights. Taxability for each floor depends on contractual allocation of land and construction values; alternatives include charging service tax on the construction element for the owner's floor and treating other floors as declared services or applying the abatement to derive the taxable service portion.