Service Tax - Abatement - Construction of Residential Unit - Confusion between FM's Speech and CBEC Notification
A Netizen writes in:
Para 182 of the Budget Speech reads as:
182. Homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of Rs. 1 crore or more are high-end constructions where the component of ‘service' is greater. Hence, I propose to reduce the rate of abatement for this class of buildings from 75 percent to 70 percent. Existing exemptions from service tax for low cost housing and single residential units will continue.
The Honourable Finance Minister has included homes and flats in the category of high-end constructions if these meet the following conditions:
1. If the Carpet Area is equal to or greater than 2000 sq. ft; or
2. If the value is equal to or greater than Rs. 1 Crore.
If one of the conditions specified above meets, then that construction will fall under high-end category and the abatement will be limited 70% and taxable portion will be 30%.
Now, Sl. No. 12 to be substituted in Notification No. 26/2012 - ST dated 20th June, 2012 vide Notification No. 2/2013-ST dated 1st March, 2013 is reproduced below:
12. " ………. (i) for residential unit having carpet area upto 2000 sq. ft; or where the amount charged is less than rupees one crore" - 25%
As per this condition, if the carpet area is less than or equal to 2000 sq. feet; or if the value is less than Rs. 1 crore., the taxable portion will remain at 25%, which means, if any one of these conditions are satisfied, the rebate will be 75% and taxable portion will be 25% only.
Is this the intention of the budget speech? Meaning thereby if the carpet area is 1000 sq. ft; and the value charged is Rs. 2.00 crores, will that be not a high-end construction?
In this case, can the assessee be denied 75% rebate (taxable portion only 25%), when he is meeting one of the conditions of clause (i) of the Notification No. 2/2013?
DDT adds:
The notification clearly failed to give effect to the intention of the Government reflected in the Budget speech of FM. The Notification in the present form allows 75% abatement to a flat having a carpet area of 1000 sft and costing Rs 2 crores. Actually, in such cases, the abatement should have been only 70%, if we go by the Budget Speech.
The Notification reads now:
12. | Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority,- | (i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004; (ii) The value of land is included in the amount charged from the service receiver | |
(i) for residential unit having carpet area upto 2000 square feet or where the amount charged is less than rupees one crore; | 25 | ||
(ii) for other than the (i) above | 30 |
Perhaps, it should have been worded like this:
12. | Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority,- | (i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004; (ii) The value of land is included in the amount charged from the service receiver. | |
(i) for residential unit having carpet area of 2000 square feet or more OR where the amount charged is more than rupees one crore; | 30 | ||
(ii) for other than the (i) above. | 25 |
It is obviously difficult for the babus to translate the FM's English into Notifications.