Commissioner of Service tax, Mumbai has issued circluar to clarify service tax on redevelopment and slum rehabiliation project (SRA) and service tax on floor rising charges. The text of said circular is reproduced herebelow:
F.No.V/St-1/Tech-II/463/11
Mumbai, 31st
August, 2012
Clarification regarding service tax on construction industry – reg.
1.
Service Tax on Redevelopment and Slum
Rehabilitation Project (SRA) :
As far as taxability for Redevelopment and SRA
Projects is concerned, Board has issued a Circular No. 151/2/2012 ST dated 10th
February, 2012. The clarification given in the said Circular would be
applicable up to the period 30th June, 2012 only. After 1st
July, 2012, following clarification is issued:
Under section 66E of the finance Act, Construction
Service has been notified as a declared service. Further, the exclusion clause of “intended for
personal use of residence’’ as was available in the earlier definition is not
available in the present definition. Therefore, it is clarified that even when
Construction Service is provided to the existing flat owners or slum owners under
a scheme of redevelopment or SRA project, Service tax would be liable to be
paid for such services. In other words, even when the construction is made for
the existing flat owners or slum owners for which no consideration or part
consideration is paid to the developer, still Service Tax would be liable to be
paid by the person who undertakes the construction activity. For the purpose of
valuation, provision of section 67 and the Service tax Valuation Rules may be
referred.
2.
Service Tax on floor rising charges:
As per your letter, it has been mentioned that
many builders charge additional amount known as “floor rise charges” in addition to
the normal sale price of a flat. It is also mentioned in your letter that the
said charges are recovered for additional construction cost for floor rise
because the construction cost increases as per the increase in the floor. On
this issue, it is clarified that since the floor rise charges are recovered on
account of additional construction cost, it would be treated as part of the
consideration for sale of flat in terms of provisions of section 66F (Naturally
Bundled Services). Consequently, the floor rise charges would be eligible for
the abatement of 75% in terms of Notification No. 26/2012 ST. However , it is
clarified that this clarification is limited to floor rise charges only and not
for other components of erstwhile definition of “Preferential Location Service”
which cover many other services.
(Sushil Solanki)
Commissioner
Service Tax -I : Mumbai
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