Any service provided or to be provided
to any person, by any other person, in relation to construction of complex is
taxable under sub-clause (zzzh) of section 65(105) of the Finance Act,
1994.“Construction of complex” has been
defined under clause (30a) of section 65 of the Finance Act, 1994. “Residential complex” has been defined under
clause (91a) of section 65 of the Finance Act, 1994.
Construction of new building or civil
structures used for commercial or industrial purposes and repair, alteration or
restoration activities of such buildings or civil structures is liable to
service tax since 2004.In this year’s
budget the construction of new residential complex is defined under section 65
(30a) of the Finance Act 1994. It covers,
-construction
of a new residential complex
-and
finishing services in relation to a residential complex, whether or not new.
-repair,
alteration, etc. in relation to residential complex, whether or not new.
This
service would generally cover construction services in respect of residential
complexes developed by builders, promoters or developers.Such residential complexes are normally
constructed after obtaining approval of the statutory authority for their
layout.For the purpose of this levy, residential complex means,-
1)a
building or buildings located within a premises;
2)total
number of residential units within the said premises are more than twelve;
3)having
common area;
4)having
common facilities or services; and
Common
area would include roads, staircases and other similar areas where residents of
the residential complex have easement rights.The list of facilities prescribed is merely illustrative and not
exhaustive.Some residential complexes
may also contain other facilities such as market or shopping complex, schools,
security, banks, gymnasium, health club, sports facilities, power back up and the
like.
However,
residential complex having only 12 or less residential units would not be
taxable.Similarly, residential complex
constructed by an individual, which is intended for personal use as residence and is constructed by an individual, which is intended for personal use as
residence and is constructed by directly availing services of a construction
service provider, is also not covered under the scope of the service tax and
not taxable.
Post
construction, completion and finishing services such as glazing, plastering,
painting, floor and wall tiling, wall covering and wall papering, wood and
metal joinery and carpentry and similar services done in relation to a
residential complex, whether or not new, would be included as part of the
construction activity of residential complexes for the purpose of levy of
service tax.
The
taxable service is the service provided in relation to construction of a
residential complex. Service tax would
be payable only on the gross amount charged by the service provider for the
construction service provided and it would not include the cost of land and stamp duty paid for registration of land.
However, notification No.18/2005 AST dated 7/6/05 provides option to
avail abatement and pay service tax only on 33% of the gross amount charged,
subject to fulfilment of conditions specified in the notification.
Repair,
alteration,renovation or restoration of residential complexes would also be
liable to service tax.Such services
provided in relation to residential complexes which are in existence before the
levy has come into force and are not new would also be liable to be taxed.
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