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COMMISSIONERATE
OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX,
BHUBANESWAR-1,CR
BUILDING,RAJASWA VIHAR,BHUBANESWAR-7.
C.no: v (5) 7/s.
Tax/B-1/05/
Dated: 22.12.05
To
The Secretary
Real Estate Developer’s
Association of Orissa,
202,Lord Gagan Commercial complex,
Gajapati Nagar, Bhubaneswar-05
Dear sir,
SUB: - Levy of service
tax on builders/Developers-reg
Please refer to your
letter, dated 14.11.05 on the subject cited above wherein you have
raised further queries on the subject.
In this connection, in continuation to
this office earlier letter of even no.21707 dated 07.11.05
the matter is once again explained to you, as under.
POSITION
OF SERVICE TAX LAW
Saving
for certain exemptions, as per section 65(zzzh) of the fiancé
act, 1994 any person providing any service to another person in
relation to construction of residential complex is liable get
himself registered and pay service tax to the department. In this
case, the builder/developer who provides the service in relation
to construction of residential complex to the customer owner of
the dwelling unit) is liable to get himself registered and pay
service tax. During the course of the service if the
developer/builder receives any such service from another
contractor, in other words, outsources part of the service to
another service provider, then the other service provider is also
liable to pay service tax.
EXEMPTIONS
In addition to
certain general exemptions, there are some specific exemptions.
Firstly the residential complex having only 12 or less residential
units is exempted from service tax. Secondly, the residential
complex constructed by an individual, which is intended for
personal use as residence by directly availing services of a
construction service provider is also exempted.
From the above, it can be inferred that
if the owner of a land constructs residential complexes of
his own or by directly availing services of a construction service
provider and then sells the residential units along with the land,
the said owner of the land is not liable to pay service tax as he
hasn’t rendered his service to anyone. Other than this, in cases
where the developer/builder. whether directly or indirectly,
constructs residential complexes for another person on that
person’s land/some other person’s land by virtue of power of
Attorney or otherwise, then such builder/developer is liable to
pay service tax. In this case he has rendered service to the land
owner/ residential unit’s owner.
In orissa majority of cases fall under the later
category,i.e., the land on which the developer’s/builder’s
construct residential complexes are not in the name of the
builders/developer’s. The landowner directly sells the land to
the individual residential unit owner’s. The developers/builders
act as facilitators/middlemen between the landowners and the
purchasers. They also render construction service either directly
or indirectly. So, such types of builders/developers are liable to
pay service tax.
OPINION OF
R K AGARWAL,CA.
At the outset this is
to make it very clear that the opinions offered by Mr. R.K.
Agarwal, ca are of his own views and doesn’t have any legal
backing. His opinions cannot serve as the base for not taking
registration and not paying tax.
Further more, as it appears from the said letter, the
querist M/S Tritan Happy Homes Pvt.Ltd., for which the CA has
given his opinion, constructs& sells residential complexes on
the land of which he has the absolute title right. In that case
M/s Tritan Happy Homes doesn’t render service rather directly
sells the residential units.
Therefore, you are once again requested to intimate your
members who render construction of residential complex service to
get them registered with
the department and pay service tax along with appropriate interest
W.E.F. 16.06.05 without further delay. Their failing to take
registration immediately may attract legal action from this end.
Yours faithfully
(B Acharya)
JT.Commissioner (S.Tax)
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