Service Tax on Construction of Residential Complex - Board Circular clarified
THERE is always a well-known solution to every human problem--neat, plausible, and wrong! The problem with clarifications given by the government is that the clarifications themselves need further clarifications.
The CBEC had vide Circular No. , Dated : January 29,2009 had clarified on the service tax on builders, which had generated heated debates in TIOL columns.
Recently the Assistant Commissioner (Tech) in the Service Tax Commissionerate explained and clarified the Board Circular.
According to the Assistant Commissioner,
the sum and substance of the clarification issued in the circular is that no service tax is payable in cases of:-
(i) Sale of building/flat either by outright sale or by agreement for sale followed by sale of building (in this case stamp duty will be paid for full value of flat and not for the land portion alone)
(ii) Construction of a residential complex i.e. more than 12 flats is provided to a customer for personal use.
If the transaction involves a composite agreement for sale of undivided share of land and construction of flats/apartments there on, there is no outright sale of flat and service tax has to be paid by the Builder/Promoter/Developer under Construction of Residential Complex Service.
The circular is not applicable to works contract service because a works contract always has two parties-one service provider and another service recipient. Thus there cannot be self service in a works contract. Board's clarification mentions that Service Tax is not liable where activity is self-service. Hence Service Tax is leviable to works contracts.
Does the Board agree?