Tuesday, April 1, 2014

Clarification on Service Tax on Redevelopment and Slum Rehabilitation Project (SRA) and Service Tax on floor rising charges

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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