Construction of Flats by Developers - is this activity a Works Contract liable to Sales Tax / Service Tax?

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....onstruction of Flats by Developers - is this activity a Works Contract liable to Sales Tax / Service Tax? <br>News and Press Release<br>Dated:- 4-8-2007<br><BR>Construction of Flats by Developers - is this activity a Works Contract liable to Sales Tax / Service Tax? " In K. Raheja Development Corporation v. State of Karnataka (Reported in 2006 TMI - 493 - Supreme Court - &nbsp;Service Tax), the h....

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....onorable Supreme Court has affirmed the decision of Karnataka High court and held that the&nbsp;construction of flats by a developer&nbsp;was in the nature of Works Contract and accordingly liable to Sales Tax (Work Contract Tax).&nbsp; In view of this decision,&nbsp;BOARD and Director General of Service Tax (DGST)&nbsp;had issued clarification regarding applicability of service tax on constructi....

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....on service. (See Circular F. No. 332/35/2006 - TRU dated 1-8-2006&nbsp;and G.G.S.T. Letter F. No. V/DGST/22/Audit/Misc/1/2004, dated 16-2 -2006)&nbsp; The clarification issued by the board & DGST and stand taken by the department, thereafter, has created more ambiguity.&nbsp; Now, in view of recent decision of the honorable High Court of Allahabad, in the matter of M/s Assotech Realty Pvt. Ltd. ....

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....(Reported in 2007 -TMI - 1440 - HIGH COURT, ALLAHABAD - Service Tax), we have to see that to what extent this&nbsp; ambiguity has been resolved. In its decision, honorable High Court of Allahabad has held that the activity in question is not in the nature of works contract and not subject to sales tax.&nbsp; A careful study of the decision of the Honorable Allahabad High Court,&nbsp;reveals the ....

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....both the cases were identical in terms of major facts and circumstances except few. The unique fact (as identified by the HC) that has&nbsp;contributed to&nbsp;these opposite rulings&nbsp;is as follows:&nbsp; K Raheja Development Corporation were constructing the units for and on behalf of the persons who has agreed to purchase the flats.&nbsp; &nbsp;Assotech Realty Pvt. Ltd. was constructing th....

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....e flats not for and on behalf of the prospective allottees but otherwise.<BR> News - Press release - PIB....