Service Tax - Construction of Flats - The Doubt Lingers
IN the same RAC meeting, a Builders Association raised a question;
There is a problem when there is a practice of registering land sale separately and payment of service tax based on the construction agreement and that when the construction is complete and completion certificate obtained from State authorities. This practice of dual agreement i.e. agreement for sale of Un Divided Share (UDS) and agreement of Construction is unique to this part of the country and therefore after completion of construction, if they still prefer to register the UDS land, the value for payment of Service Tax is an issue to be resolved and whether they can opt for Works Contract or still pay under construction services after availing the available abatements.
The department replied:
It was the stand of the Department that the choice is left with the builder to choose between Works Contract or Construction Service. And according to the agreement service tax is to be paid. It was further clarified that only at the point of sale, of the constructed portion, service tax liability arises. On obtaining Completion Certificate it would attract State VAT and the construction part would be a self service if there is no agreement entered for construction based on the UDS land sale.
The Association also wanted to know whether corpus deposit added and paid to the association would attract service tax. The Department replied that as the issue is pending before the court, the issue is sub-judice and cannot be taken up in this forum.