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Construction of Complex Building Civil Structure or Part thereof

Service Tax - Declared Services - 02 - Chapter 2 Effective date: 1.7.2012 Scope of Declared Service - Section 66E (b) Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. Meanings and Definitions: "competent authority" means the Government or any authority authorized to i .....

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ot;construction" includes additions, alterations, replacements or remodelling of any existing civil structure. Analysis: This service covers all types of construction activities. Construction activity may be in form of a construction of residential complex or construction of a commercial complex. Also it covers construction of any other civil structure. In case, if entire consideration for the construction activity received after the issuance of completion certificate by the competent autho .....

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ling of any existing civil structure. It means addition of floors in a building , alternations of the building such as extra balcony , replacement of the building such as singly story building is replace after demolition by a three storey building , remodelling of building such as residential property is converted into hotel or vice versa, are covered in this service category. However, pure repairing activity will not be covered in this service category. Repair normally includes all activities r .....

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xable as part of construction of residential complex service under clause (zzzh) of sub-section 105 of section 65 of the Act and as part of service in relation to commercial or industrial construction under clause (zzq) of sub-section 105 of section 65 of the Act. This entry covers the services provided by builders or developers or any other person, where building complexes, civil structure or part thereof are offered for sale but the payment for such building or complex or part thereof is recei .....

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developer receives consideration for the construction service provided by him, from two categories of service receivers: (a) from landowner: in the form of land/development rights; and (b) from other buyers: normally in cash. Construction service provided by the builder/developer is taxable in case any part of the payment / development rights of the land was received by the builder/ developer before the issuance of completion certificate and the service tax would be required to be paid by builde .....

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of tax under Section 66 of the Finance Act is on the taxable services defined in clause (105) of Section 65. The charge of tax is on the rendering of a taxable service. The taxable event is the rendering of a service which falls within the description set out in sub-clauses (zzq), (zzzh) and (zzzzu). The object of the tax is a levy on services which are made taxable. The fact that a taxable service is rendered in relation to an activity which occurs on land does not render the charging provisio .....

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dered on land does not make the tax a tax on land. The charge is on rendering a taxable service and the fact that the service is rendered in relation to land does not alter the nature or character of the levy. The legislature has expanded the notion of taxable service by incorporating within the ambit of clause (zzq) and clause (zzzh) services rendered by a builder to the buyer in the course of an intended sale whether before, during or after construction. There is a legislative assessment under .....

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n of a contract involving the intended sale of immovable property. 30. Parliament, in bringing about the amendment in question has made a legislative assessment to the effect that a service is rendered by builders to buyers during the course of construction activities. In our view, that legislative assessment does not impinge upon the constitutional validity of the tax once, the true nature and character of the tax is held not to fall within the scope of Entry 49 of List II. So long as the tax d .....

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same is transferred and the point of taxation will also be determined accordingly. 6.2.2 What would be the service tax liability in the following model - land is owned by a society, comprising members of the society with each member entitled to his share by way of an apartment. Society /individual flat owners give No Objection Certificate (NOC) or permission to the builder/developer, for re-construction. The builder/ developer makes new flats with same or different carpet area for original owner .....

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ers. First category is the society/ members of the society, who transfer development rights over the land (including the permission for additional number of flats), to the builder/developer. The second category of service receivers consist of buyers of flats other than the society/members. Generally, they pay by cash. Re-construction undertaken by a building society by directly engaging a builder/developer will be chargeable to service tax as works contract service for all the flats built now. 6 .....

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rsion of any hitherto untaxed construction of complex or part thereof into a building or civil structure to be used for commerce or industry, after lapse of a period of time? Mere change in use of the building does not involve any taxable service. If the renovation activity is done on such a complex on contract basis the same would be a works contract as defined in clause (54) of section 65B service portion, which would also be taxable if other ingredients of taxability are present. 6.2.5 What w .....

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ernment by an agreement transfers the right to use and/or right to develop for a period specified, usually thirty years or near about, to the concessionaire. Transactions involving provision of service take place usually at three different levels: firstly, between Government and the concessionaire; secondly, between concessionaire and the contractor and thirdly, between concessionaire and users. At the first level, Government transfers the right to use and/or develop the land, to the concessiona .....

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ause (a) of section 66D. Support services have been defined in clause (49) of section 65B as infrastructural, operational, administrative, logistic marketing or any other support of any kind comprising functions that entities carry out in the ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of movable or immovable property, security, testi .....

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as been undertaken by him on his own account and he remains the owner of the building during the concession period. However, if an independent contractor is engaged by a concessionaire for undertaking construction for him, then service tax is payable on the construction service provided by the contractor to the concessionaire. At the third level, the concessionaire enters into agreement with several users for commercially exploiting the building developed/constructed by him, during the lease per .....

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differ. For example, at times it is possible that the concessionaire may outsource the management or commercial exploitation of the building developed/constructed by him to another person and may receive a pre-determined amount as commission. Such commission would be a consideration for taxable service and liable to service tax. 6.2.6 If the builder instead of receiving consideration for the sale of an apartment receives a fixed deposit, which it converts after the completion of the building int .....

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