Liability of service tax - proportionate basis

[Chalapathy Rao Marthy]

Dear Sir, For example two parties say A and B holding two lands of different proportions say for example A 13% and B 87%. A is experinced in construction activity. B has agreed with A for developemnt of land by constructing a commercial building on the said land. Terms were such that after satisfactory completion of building B will register undivided share of land to A to the extent of 37% such that both will jointly own the building in the ratio of 50 % and 50%. In such case is 1. is A liable for service Tax 2. If answer to 1 is yes how valuation will be done.

[Guest]

In my opinion service provider is liable to pay service tax, as per details A will do the construction, it is not clear what will be the % of land construction, after construction it will be shared 50% each,since A doing the construction A raise the bill o B on his portion of construction, Service tax is payable by A and valuation is gross amount charged by A to B for construction of his land portion

[Surender Gupta]

Only a details study of the facts and circumstances would enable to decide the true nature of the transaction, whether it is works contract activity or something else.

AI Summary

Service tax liability arises where a builder receives land-share consideration and valuation follows gross amount charged. Service tax liability arises when a party undertakes construction services and receives land-share consideration; one view treats the builder as a service provider liable to pay service tax, with valuation equal to the gross amount charged to the landowner for the construction of the landowner's portion. Classification as a works contract or other arrangement requires detailed factual analysis and affects tax treatment and valuation.