TaxTMI 
TaxTMI 
Service tax on construction services — regarding.
X X X X Extracts X X X X
X X X X Extracts X X X X
....ruary, 2012 To Chief Commissioner of Customs and Central Excise (All) Chief Commissioner of Central Excise & Service Tax (All) Director General of Service Tax Director General of Central Excise Intelligence Director General of Audit Commissioner of Customs and Central Excise (All) Commissioner of Central Excise and Service Tax (All) Commissioner of Service Tax (All) Madam/Sir, Subject: Service tax on construction services - regarding. Many issues have been referred by the field formations, in the recent past, seeking clarification regarding the levy and collection of service tax on construction services [clauses (zzq),(zzzh) of section 65(105) of the Finance Act, 1994], in the light of varying business models. Across the country, divergent business models and practices are being followed in the construction sector. Some of these business models and practices could be region specific. 2. From the issues referred by the field formations, important ones have been identified model wise, examined and clarified as fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... flats to be given to the land owner, at the time when the possession or right in the property of the said flats are transferred to the land owner by entering into a conveyance deed or similar instrument(eg. allotment letter). (ii) Value, in the case of flats given to the second category of service receivers, shall be determined in terms of section 67 of the Finance Act, 1994. 2.2 Redevelopment including slum rehabilitation projects: Generally in this model, land is owned by a society, comprising members of the society with each member entitled to his share by way of an apartment. When it becomes necessary after the lapse of a certain period, society or its flat owners may engage a builder/developer for undertaking re-construction. Society /individual flat owners give 'No Objection Certificate' (NOC) or permission to the builder/developer, for re-construction. The builder/developer makes new flats with same or different carpet area for original owners of flats and additionally may also be involved in one or more of the following: (i) construct some additional flats for sale to others; (ii) ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e tax. If the investor decides to exit from the project at a later date, either before or after the issuance of completion certificate, the builder/developer would be entitled to take credit under rule 6(3) of the Service Tax Rules, 1994( to the extent he has refunded the original amount). If the builder/developer resells the flat before the issuance of completion certificate, again tax liability would arise. 2.4 Conversion Model: Conversion of any hitherto untaxed construction /complex or part thereof into a building or civil structure to be used for commerce or industry, after lapse of a period of time. Clarification: Mere change in use of the building does not involve any taxable service, unless conversion falls within the meaning of commercial or industrial construction service. 2.5 Non requirement of completion certificate / where completion certificate is waived or not prescribed: In certain states, completion certificates have been waived or are considered as not required for certain specified types of buildings. Doubts have been raised, regarding levy of service tax on the construction service provided, in such situations. Clarification: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gency for temporary use, he will not be treated as a service provider since such construction has been undertaken by him on his own account and he remains the owner of the building during the concession period. At the second level, transaction can take place between a concessionaire and the contractor. Where the concessionaire himself does not have exposure to construction sector, he may engage a contractor for undertaking construction of a building on the land, in respect of which right to use has been obtained in his favour, from the Government or its agency. If the concessionaire is himself a builder/developer, this level of transaction may not arise. Where an independent contractor is engaged by a concessionaire for undertaking construction for him, then service tax is payable on the construction service provided by the contractor to the concessionaire. At the third level, the concessionaire enters into agreement with several users for commercially exploiting the building developed/constructed by him, during the lease period. For example, t....