TIOL-DDT 422 · the untouched capture
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<p > <b><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT
422</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
7 08 2006<br>
Monday</font></b></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Service Tax on
builders – Board clarifies</font></strong></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a letter addressed to the Chairman of Builders
Association of India, Board has clarified several issues. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>1. Residential Complex:</b></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ In a case where the builder, promoter or developer builds a residential
complex, having more than 12 residential units, by engaging a contractor for
construction of such residential complex, the contractor shall be liable to
pay service tax on the gross amount charged for the construction services
provided, to the builder / promoter / developer under ‘construction of complex’
service falling under section 65(105)(zzzh) of the Finance Act, 1994.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ If no other person is engaged for construction work and the builder / promoter
/ developer undertakes construction work on his <b>own without engaging the
services of any other person,</b> then in such cases in the absence of service
provider and service recipient relationship, the question of providing taxable
service to any person by any other person does not arise. <b>(How can construction
be done without engaging the services of any other person?)</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Service tax exemption for small service providers upto an aggregate value
of taxable services of Rs. 4 lakh provided in any financial year vide notification
No. 6/2005-Service Tax dated 01.03.05 is applicable for ‘construction of complex’
service also.</font></p>
</blockquote>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>2. Own Commercial complex:</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To a question whether Service Tax is applicable
when a builder builds a commercial complex for himself and later sells it or
gives it on rent, the Board clarifies <b>Commercial complex does not fall within
the scope of “residential complex intended for personal use”. Hence, service
provided for construction of commercial complex is leviable to service tax.
</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Here also there is no service provider;
how can there be a tax? </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>3. Individual bungalow: </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether construction of an individual residential
bungalow attract Service Tax? </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Board clarified that the issue had been already
clarified vide F. No. B1/6/2005-TRU dated 27.07.05, that residential complex
constructed by an individual, intended for personal use as residence and constructed
by directly availing services of a construction service provider, is not liable
to service tax.</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>4. What will happen if Service provider
has vanished? </b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The association had asked for detailed guidelines
on tax calculation and what would happen if the service provider has left
the work; then who would pay?</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board replied that tax can be paid on
33% of the gross receipts, that commercial or industrial construction’ service
was effective from 10.09.04 and construction of complex’ service from 16.06.05.
</font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Board has not answered about the truant
service provider. We may answer it. There is no liability on the service receiver
except in some cases like a foreign service provider. So if a service provider
has vanished, it is the government’s job to find him and the service receiver
is in no way responsible.</b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board has advised the association to contact
the jurisdictional officers with relevant facts for appropriate guidance. That
really is the problem. If the jurisdictional officers could provide appropriate
guidance, there would have been absolutely no confusion, but the jurisdictional
officers confess that they are as confused if not more as the assessees. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If there is clarity in conception and expression,
there could be less confusion in implementation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2006/ser_tru.htm">
</a></u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2006/ser_tru.htm"><u>Board’s F.
No. 332/35/2006 – TRU dated 1<sup>st</sup> August, 2006.</u></a></font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Housing Societies liable
to pay Service Tax</font></b></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Mumbai Service Tax Commissioner in his
F. No. V/ST/HQ/Tech-25/06/45/5 dated 10.7.2006 has clarified that</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ A person or body of persons by whatever name called whether registered
or not, providing services, facilities or advantages for a subscription or
any amount is to pay Service Tax.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Services can be numerous such as security of premises, up keep of the premises,
maintenance of common passage, parking facilities, lifts etc,.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ The commercial or non commercial nature of such body has no bearing on
the levy of Service Tax.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Further the legal provision provides for tax even when the services are
provided by such body to its own members.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ A housing society which is registered under the Cooperative Societies Act
is a legal entity which provides service to its members and would fall within
the scope of this service.(club or association)</font></p>
</blockquote>
<p align=center ><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>More SEZs may be permitted.
</strong></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
government had fixed the number of SEZs in the country to be in the range
of 150. This was because it did not expect the kind of enthusiastic response
that the SEZ scheme had elicited. This is not the final limit and may be
expanded according to Mr. GK Pillai, Special Secretary in the Commerce Ministry.
105 approvals had already been given in three months. </font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mr. Pillai said that the provisions of the SEZ Act would prevail
when they were in conflict with other laws. This was meant for customs, excise
and income tax officers to note.</font></p>
<p align=center ><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Gifts too stolen
from PM’s plane?</font></strong></font></p>
<p align="justify" ><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems it was not liquor alone that was
stolen from the PM’s plane during his visit to <st1:country-region w:st="on"><st1:place w:st="on">Germany</st1:country-region>
but several gifts also including premium pens, luggage items, assorted colognes,
CD players, iPods, sunglasses and electronic goods. Obviously the theft was
undertaken b y high paid airline staff! </font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more DDT
</font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p>
<p align="justify" ><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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