RESIDENTIAL COMPLEX CONSTRUCTION

 

Date of Introduction: 16.06.2005 vide Notification NO.15/2005 dated 07.06.2005

 

Definitions:  “residential complex” means any complex comprising of—

 

(i) a building or buildings, having more than twelve residential units;

 

(ii) a common area; and

 

(iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. Explanation. — For the removal of doubts, it is hereby declared that for the purposes of this clause, —

 

                (a) “personal use” includes permitting the complex for use as residence by another person on rent or without consideration;

                (b) “residential unit” means a single house or a single apartment intended for use as a place of residence; (section 65(91a))

 

“construction of complex” means — construction of a new residential complex or a (a) part thereof; or completion and finishing services in relation (b) to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or repair, alteration, renovation or restoration (c) of, or similar services in relation to, residential complex; (section 65(30a))

 

“taxable service” means any service provided or to be provided to any person, by any other person, in relation to construction of complex; (section 65(105)(zzzh)) Value of Taxable Service: The value of taxable service shall be the gross amount charged by the service provider for providing such service and the money value of any other consideration ( if any) received for providing such service. The value of taxable service shall be determined as per the provisions made under section 67 of the Finance Act, read with Service Tax (Determination of Value ) Rules, 2006 Who is responsible to pay Service Tax: The service provider is responsible to pay service tax. However, in cases, where the provider of taxable service is located outside India and the recipient of service is located in India, the recipient of service is responsible for payment of service tax. The responsibility to pay service tax under such situations is determined by the provisions made under section 66A of the Finance Act, 1994, read with Taxation of Services (Provided from outside India and received in India) Rules, 2006 Scope of Service: 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 or a part thereof is also covered under service tax. The term of “construction of complex” is defined under section 65 (30a) of the Finance Act 1994. It covers,­

 

construction of a new residential complex;

 

     completion 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,­

 

(i) a building or buildings located within a premises;

(ii) total number of residential units within the said premises are more than twelve;

(iii) having common area;

(iv) having common facilities or services; and

(v) layout of the premises has been approved by the appropriate authority. 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 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 –ST 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.

(Ref: Board’s Circular No. F.No.B1/ 6 /2005-TRU dated 27.07.2005)

 

General Exemptions:
 

Sr.No.

Notification No.

Nature of exemption

1

16/2002

Services provided to United nations or any International Organisation

2

12/2003

Exemption to value of goods and material sold during the course of providing taxable service, subject to conditions laid down in the notification.

3

4/2004

Service provided to a developer of Special Economic Zone or Unit located in SEZ

4

6/2005

Exemption from service tax for taxable services upto gross value of Rs. 4 lakhs, in case of service providers whose gross turnover for the preceding financial year was less than Rs. 4 lakhs ( w.e.f 01.04.2005)


 

 

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