Scribd Logo
Upload

Welcome to Scribd!

  • 227 views

    Circular - 108-02-2009-ST

    Uploaded by

    jayamurli19547922
    The document discusses whether service tax applies to builders and developers who enter agreements to sell residential units prior to or during construction. It examines views on whether such transactions constitute a taxable service or a sale, and concludes that as long as the property remains under the builder's ownership per the transfer of property act, any construction services provided are considered "self-service" and not taxable until a final sale deed is executed upon completion. However, if third party service providers like contractors or designers are engaged, they would be liable to pay service tax.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd

    Circular - 108-02-2009-ST

    Uploaded by

    jayamurli19547922
    227 views2 pages
    The document discusses whether service tax applies to builders and developers who enter agreements to sell residential units prior to or during construction. It examines views on whether such transactions constitute a taxable service or a sale, and concludes that as long as the property remains under the builder's ownership per the transfer of property act, any construction services provided are considered "self-service" and not taxable until a final sale deed is executed upon completion. However, if third party service providers like contractors or designers are engaged, they would be liable to pay service tax.

    Original Description:

    Clarification on Imposition of service tax on Builders

    Original Title

    Circular -108-02-2009-ST

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses whether service tax applies to builders and developers who enter agreements to sell residential units prior to or during construction. It examines views on whether such transactions constitute a taxable service or a sale, and concludes that as long as the property remains under the builder's ownership per the transfer of property act, any construction services provided are considered "self-service" and not taxable until a final sale deed is executed upon completion. However, if third party service providers like contractors or designers are engaged, they would be liable to pay service tax.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    227 views2 pages

    Circular - 108-02-2009-ST

    Uploaded by

    jayamurli19547922
    The document discusses whether service tax applies to builders and developers who enter agreements to sell residential units prior to or during construction. It examines views on whether such transactions constitute a taxable service or a sale, and concludes that as long as the property remains under the builder's ownership per the transfer of property act, any construction services provided are considered "self-service" and not taxable until a final sale deed is executed upon completion. However, if third party service providers like contractors or designers are engaged, they would be liable to pay service tax.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 2

    Circular No.

    108/02/2009 – ST

    F. No. 137/12/2006-CX.4
    Government of India
    Ministry of Finance
    Department of Revenue
    Central Board of Excise and Customs
    ***
    th
    New Delhi, dated 29 January 2009

    Subject: Imposition of service tax on Builders - regarding

    ************

    Construction of residential complex was brought under service tax w.e.f.01.06.2005. Doubts have
    arisen regarding the applicability of service tax in a case where developer / builder/promoter enters into
    an agreement, with the ultimate owner for selling a dwelling unit in a residential complex at any stage of
    construction (or even prior to that) and who makes construction linked payment. The ‘Construction of
    Complex’ service has been defined under Section 65 (105)(zzzh) of the Finance Act as “any service
    provided or to be provided to any person, by any other person, in relation to construction of a complex”.
    The ‘Construction of Complex’ includes construction of a ‘new residential complex’. For this purpose,
    ‘residential complex’ means any complex of a building or buildings, having more than twelve residential
    units. A complex constructed by a person directly engaging any other person for designing or planning of
    the layout, and the construction of such complex intended for personal use as residence by such person
    has been excluded from the ambit of service tax.

    2. A view has been expressed that once an agreement of sale is entered into with the buyer for a unit
    in a residential complex, he becomes the owner of the residential unit and subsequent activity of a builder
    for construction of residential unit is a service of ‘construction of residential complex’ to the customer and
    hence service tax would be applicable to it. A contrary view has been expressed arguing that where a
    buyer makes construction linked payment after entering into agreement to sell, the nature of transaction is
    not a service but that of a sale. Where a buyer enters into an agreement to get a fully constructed
    residential unit, the transaction of sale is completed only after complete construction of the residential
    unit. Till the completion of the construction activity, the property belongs to the builder or promoter and
    any service provided by him towards construction is in the nature of self service. It has also been argued
    that even if it is taken that service is provided to the customer, a single residential unit bought by the
    individual customer would not fall in the definition of ‘residential complex’ as defined for the purposes of
    levy of service tax and hence construction of it would not attract service tax.

    3. The matter has been examined by the Board. Generally, the initial agreement between the
    promoters / builders / developers and the ultimate owner is in the nature of ‘agreement to sell’. Such a
    case, as per the provisions of the Transfer of Property Act, does not by itself create any interest in or
    charge on such property. The property remains under the ownership of the seller (in the instant case, the
    promoters/builders/developers). It is only after the completion of the construction and full payment of the
    agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to
    the ultimate owner. Therefore, any service provided by such seller in connection with the construction of
    residential complex till the execution of such sale deed would be in the nature of ‘self-service’ and
    consequently would not attract service tax. Further, if the ultimate owner enters into a contract for
    construction of a residential complex with a promoter / builder / developer, who himself provides service
    of design, planning and construction; and after such construction the ultimate owner receives such
    property for his personal use, then such activity would not be subjected to service tax, because this case
    would fall under the exclusion provided in the definition of ‘residential complex’. However, in both these
    situations, if services of any person like contractor, designer or a similar service provider are received,
    then such a person would be liable to pay service tax.

    4. All pending cases may be disposed of accordingly. Any decision by the Advance Ruling Authority in
    a specific case, which is contrary to the foregoing views, would have limited application to that case only.
    In case any difficulty is faced in implementing these instructions, the same may be brought to the notice
    of the undersigned.

    (Gautam Bhattacharya)
    Commissioner (Service Tax)
    CBEC, New Delhi

    You might also like