WIRC_-_J_B_Nagar_25-11-2011 - jb nagar cpe study circle of wirc ...
WIRC_-_J_B_Nagar_25-11-2011 - jb nagar cpe study circle of wirc ...
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N. K. SHETH & COMPANY<strong>WIRC</strong> JOINTLY WITH J.B. NAGAR CPE STUDY CIRCLEWelcome all participants to Service Tax Intensive CourseSubject : Service Tax issues – Builders & DevelopersDate : <strong>25</strong> th November, 20<strong>11</strong> (Friday)Venue : Onyx Hall, Hotel-VITS, A-K- Road, Kondivita Lane, Andheri(east), Mumbai.Faculty : CA. Naresh K. ShethE-Mail ID : nksheth@vsnl.comnksheth<strong>25</strong>@gmail.comN.K.Sheth & Company1Preamble / Scope <strong>of</strong> Presentation‣ Scope <strong>of</strong> presentation restricted to amendments made in following constructionrelated services by Finance Act, 2010 w.e.f. 01.07.2010:• Commercial or Industrial Construction [Section 65(<strong>25</strong>b) read with Section65(105)(zzq)] – Service tax on sale <strong>of</strong> under construction units.• Construction <strong>of</strong> Complex [Section 65(30a) read with Section 65(105)(zzzh)] –Service tax on sale <strong>of</strong> under construction flats / residential units.• Preferred location services [Section 65(105)(zzzzu)] – pertaining to sale <strong>of</strong>flats / units taxable w.e.f. 01.07.2010.‣ Presentation contains only relevant extract/gist <strong>of</strong> definitions in paraphrased manner‣ Faculty will deliberate on FAQs, case studies and relevant judicial pronouncementson above captioned subject.‣ For qualitative coverage <strong>of</strong> issues in time allotted, faculty will stick to the scopeprescribed.N.K.Sheth & Company 21
N. K. SHETH & COMPANYSale <strong>of</strong> Flats / Units – Jurisprudence History 1/5‣ Prevalent and general view:• Builder sales immovable property.• No service tax on sale <strong>of</strong> flats / units.‣ Sale <strong>of</strong> completed flats / units were never liable to service tax.‣ Service tax applicability on under construction flats is a subject matter <strong>of</strong> litigationand controversy.‣ For sale <strong>of</strong> under construction flats, issue is whether builder constructs the flats:• On his own account as a property seller: or• Constructs on behalf <strong>of</strong> allottees as service provider.‣ Honorable Supreme Court in case <strong>of</strong> K Raheja Development Corporation vs. State<strong>of</strong> Karnataka (AIR 2005 SC 2350) in context <strong>of</strong> Karnataka Works Contract Tax held:• Builder constructs flats for prospective customers and• Builder does not construct property for himself.N.K.Sheth & Company 3Sale <strong>of</strong> Flats / Units – Jurisprudence History 2/5• Builder is executing work on behalf prospective customers.• Falls under definition <strong>of</strong> Works Contract liable to Sales Tax under KarnatakaSales Tax Laws.‣ DGST’s Circular F No.V/DGST/22/AUD/MISC/10/2004 dated 16.02.2006 suggests:• Levy <strong>of</strong> service tax on sale <strong>of</strong> under construction flats / units.• No levy <strong>of</strong> service tax on flats / units sold after completion.‣ Mahakaushal Builders Welfare Association Vs. SCE [2006] 5STT 341 (MP):• Above referred DGST circular was challenged in writ petition.• High Court rejected the writ petition treating it premature on following grounds:– No assessment yet made on petitioner.– No demand is served on the petitioner.– No liability is raised on petitioner.• Merits / demerits have not been considered by High Court.N.K.Sheth & Company 42
N. K. SHETH & COMPANYSale <strong>of</strong> Flats / Units – Jurisprudence History 5/5• It is a self service for a builder and does not render any service to allottees.• Service tax not leviable on under construction flats.‣ Supreme court in special leave petition - L&T Ltd (2008-TIOL-186-SC-CT) on workscontracts tax, has referred K. Raheja’s case to larger bench for re-consideration.‣ CBEC vide Circular No. 108/02/2009 – ST dated 29.01.2009 clarified that sale <strong>of</strong>residential flats is not taxable on following grounds:• Construction amounts to self service.• Construction for personal use is excluded from definition <strong>of</strong> residentialcomplex.‣ K. Raheja case is still pending for review before larger bench in Supreme Court. Itis yet to take final view on applicability <strong>of</strong> VAT and service tax on sale <strong>of</strong> flats.‣ Finance Act, 2010 inserted explanation in respective category deeming sale <strong>of</strong>under construction flats / units as service liable to service tax w.e.f. 01.07.2010.N.K.Sheth & Company 7Amendments by Finance Act, 2010‣ An explanation is inserted in Section 65(105)(zzq):• Expands the scope <strong>of</strong> “Commercial and Industrial Construction Service ”.• Deems builders to be service provider for units sold during construction.• Makes builders liable to service tax in respect <strong>of</strong> sale <strong>of</strong> under constructionunits w.e.f. 01.07.2010.‣ An explanation is inserted in Section 65(105)(zzzh):• Expands the scope <strong>of</strong> “Construction <strong>of</strong> Complex Service” category.• Deems builders / developers to be service provider in respect <strong>of</strong> residentialflats sold during construction.• Liable to service tax on sale <strong>of</strong> under construction flats w.e.f. 01.07.2010‣ Introduction <strong>of</strong> new service category U/s 65(105)(zzzzu) w.e.f. 01.07.2010:• Provision <strong>of</strong> preferential location.• Development <strong>of</strong> Complex.N.K.Sheth & Company 84
N. K. SHETH & COMPANYCommercial Construction - Extract <strong>of</strong> Definition‣ 65(105)(zzq) - "taxable service" means :• Any service• provided• or to be provided,• to any person,• by any other person,• in relation to• Commercial or Industrial construction.‣ Applicable w.e.f. 10.09.2004N.K.Sheth & Company 9Commercial and Industrial Construction - Definition65(<strong>25</strong>b) - “commercial or industrial construction " means—‣ construction <strong>of</strong> a new building or civil structure or a part there<strong>of</strong>; or‣ construction <strong>of</strong> pipe line or conduit‣ completion and finishing services such as:• Glazing, plastering, painting, floor and wall tiling,• wall covering and wall papering,• wood and metal joinery and carpentry,• fencing and railing,• construction <strong>of</strong> swimming pools,• acoustic applications or fittings• and other similar services; or‣ repair, alteration, renovation or restoration <strong>of</strong>, or similar services in relation tobuilding or civil structure, pipe line or conduit,N.K.Sheth & Company 105
N. K. SHETH & COMPANYCommercial and Industrial Construction - Definitionwhich is —(i) used, or to be used, primarily for; or(ii) occupied, or to be occupied, primarily with; or(iii) engaged, or to be engaged, primarily in,• commerce or industry, or work intended for commerce or industry,• but does not include such services provided in respect <strong>of</strong>: Roads, Airports, Railways, Transport terminals, Bridges, Tunnels Dams.N.K.Sheth & Company <strong>11</strong>Commercial Construction – Deemed Service‣ Explanation to section (zzq) – Deemed Service :• For the purpose <strong>of</strong> this sub-clause, the construction <strong>of</strong> a new building• which is intended for sale,• wholly or partly,• by a builder or any person authorized by the builder• before, during or after construction• shall be deemed to be service provided by the builder to the buyer.Except cases for which:• no sum is received from or on behalf <strong>of</strong> the prospective buyer• by the builder or the person authorized by the builder• before grant <strong>of</strong> completion certificate• by the authority competent to issue such certificate under any law for the timebeing in forceN.K.Sheth & Company 126
N. K. SHETH & COMPANYCommercial Construction – Deemed Service‣ Explanation only deems:• Sale <strong>of</strong> units to be a service provided by builder to buyers.• Builder to be a service provider (contractor).• Buyer to be a service recipient.‣ Once it is deemed as a service, all provisions applicable to “commercial or industrialconstruction service” category shall apply accordingly.‣ Sale <strong>of</strong> units to be used for commercial purpose are taxable.‣ Units used or to be used for non-commercial purpose are not taxable:• Units sold to organization / institutes established solely for educational,religious, charitable, philanthropic purpose.• Units sold to government.N.K.Sheth & Company 13Construction <strong>of</strong> Complex – Extract <strong>of</strong> Definition‣ 65(105)(zzzh) - "taxable service" means :• Any service• provided• or to be provided,• to any person,• by any other person,• in relation to• construction <strong>of</strong> complex.‣ Applicable w.e.f 10.09.2004N.K.Sheth & Company 147
N. K. SHETH & COMPANYConstruction <strong>of</strong> Complex – Extract <strong>of</strong> Definition‣ 65(30a) - "construction <strong>of</strong> complex" means—• construction <strong>of</strong> a new residential complex or a part there<strong>of</strong>; or• completion and finishing services in relation 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 <strong>of</strong> swimming pools, acoustic applications or fittings and other similar services; or• repair, alteration, renovation or restoration <strong>of</strong>, or similar services in relation to,residential complex.N.K.Sheth & Company 15Residential Complex – Relevant Extract <strong>of</strong> Definition‣ 65(91a) - "residential complex" means any complex comprising <strong>of</strong> :• building or buildings, having more than 12 residential units; common area; and• any one or more <strong>of</strong> 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 <strong>of</strong> such premises is approved by anauthority 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 <strong>of</strong> the layout, and the construction <strong>of</strong> such complex isintended for personal use as residence by such person.‣ “Personal use" includes permitting the complex for use as residence by anotherperson on rent or without consideration.N.K.Sheth & Company 168
N. K. SHETH & COMPANYCirculars – Construction for personal use is exempt‣ Circular No.108/02/2009-ST dated 29.01.2009 clarified that:• Sale <strong>of</strong> residential flats not liable to service tax on following grounds: Self service Personal useThe circular is still on the statute book.‣ TRU Clarification F. No. 332/16/2010-TRU dated 24.05.2010• issued after enactment <strong>of</strong> Finance Act, 2010• Residential houses constructed by National Building Construction CorporationLtd (NBCC) for residence <strong>of</strong> Central Government Officers’ is not liable toservice tax on the ground that it is intended for personal use as residence.N.K.Sheth & Company 17Residential Construction – Deemed Service‣ Explanation to section (zzzh) – Deemed Service :• For the purpose <strong>of</strong> this sub-clause,• the construction <strong>of</strong> a complex which is intended for sale,• wholly or partly,• by a builder or any person authorized by the builder• before, during or after construction• shall be deemed to be service provided by the builder to the buyer.Except cases for which:• no sum is received from or on behalf <strong>of</strong> the prospective buyer• by the builder or the person authorized by the builder• before grant <strong>of</strong> completion certificate• by the authority competent to issue such certificate under any law for the timebeing in forceN.K.Sheth & Company 189
N. K. SHETH & COMPANYResidential Construction – Deemed Service‣ Explanation only deems:• Sale <strong>of</strong> units to be a service provided by builder to buyers.• Builder to be a service provider (contractor).• Buyer to be a service recipient.‣ Once it is deemed as a service, all provisions applicable to “construction <strong>of</strong> complexservice” category shall apply accordingly.‣ Only services in relation to “Residential Complex” as defined U/s.65(91a) would betaxable.‣ Flat sale in building or complex having less than 12 or less units will not be taxable.‣ Sale <strong>of</strong> flat for personal use – whether liable to tax?- An arguable case.N.K.Sheth & Company 19Relevant Notifications / Order 1/2‣ Notification No.36/2010-ST dated 28.06.2010:• Advances received before 01.07.2010 towards under construction flats / unitsnot liable to service tax.• This applies to commercial as well residential construction services.• This does not apply to preferred location services category.‣ Notification No.28/2010-ST dated 22.06.2010:• Construction <strong>of</strong> residential complex under Jawaharlal Nehru Urban Mission andRajiv Awaas Yojana are exempted.N.K.Sheth & Company 2010
N. K. SHETH & COMPANYRelevant Notifications / Order 2/2‣ Service tax (Removal <strong>of</strong> Difficulty) Order 2010 dt. 22.06.2010 listed following asauthority competent to issue completion certificate:• Architect registered with the Council <strong>of</strong> Architecture constituted under theArchitects Act, 1972 (20 <strong>of</strong> 1972); or• Chartered engineer registered with the Institution <strong>of</strong> Engineers (India); or• Licensed surveyor <strong>of</strong> the respective local body <strong>of</strong> the city or town or village ordevelopment or planning authority;who is authorized to issue a completion certificate in respect <strong>of</strong> residential orcommercial or industrial complex as pre-condition for its occupation.N.K.Sheth & Company 21Deemed Service – Important Points 1/2‣ Sale <strong>of</strong> flats / units liable to service tax:• Any part <strong>of</strong> sale consideration is received before completion.• Receipt <strong>of</strong> even small amount before completion will trigger service tax liabilityfor entire sales consideration.‣ Sale <strong>of</strong> flats / units not liable to tax:• Where full consideration is received after completion.• Re-sale <strong>of</strong> the flats / units.‣ Construction <strong>of</strong> flat / unit intended for sale is liable to service tax.‣ Flats / units not intended for sale are not liable to service tax.• Building constructed for self use.• Building constructed for renting purpose.• Portion <strong>of</strong> building retained for joint venture partner / co-developer.N.K.Sheth & Company 22<strong>11</strong>
N. K. SHETH & COMPANYDeemed Service – Important Points 2/2‣ Only Builder or person authorized by him is liable to service tax.‣ The allottees / investors selling the under construction flats / units are not liable toservice tax as:• They are not rendering construction services.• They are not builders / person authorized by the builderN.K.Sheth & Company 23Builders – Calculation <strong>of</strong> Service Tax Liability‣ Service tax is payable on value <strong>of</strong> taxable services.‣ Sale <strong>of</strong> flat / commercial unit is a composite deal for transfer <strong>of</strong> rights in land andstructure. Sale value consists <strong>of</strong> land value, material cost and service cost.‣ No mechanism is provided under legislation to workout value <strong>of</strong> taxable service.‣ Notification 1/2006-ST dt. 01.03.2006 is amended w.e.f. 01.07.2010 for abatement.‣ Builders will be liable to pay service tax @ 10.30% on the abated value.Particulars Abatement Effective tax rateWhere the cost <strong>of</strong> land is not separately75% 2.575% <strong>of</strong> total valuerecovered from buyerWhere the cost <strong>of</strong> land is recovered 67% 3.40% <strong>of</strong> construction workseparately from buyer‣ Abatement is not available where builder has availed:• Benefit <strong>of</strong> Notification No.12/2003 dated 20.06.2003• Cenvat credit under Cenvat Credit Rules, 2004N.K.Sheth & Company 2412
N. K. SHETH & COMPANYValidity <strong>of</strong> Service Tax Levy on Sale <strong>of</strong> Flats/Units 1/4‣ Subject matter <strong>of</strong> taxation:• Sale <strong>of</strong> flat is transfer <strong>of</strong> immovable property – “Transfer <strong>of</strong> Property Act, 1882”.• In pith and substance, tax is levied on sale <strong>of</strong> immovable property.• Service tax is a tax on services [Section 65(105) / Section 66].• Sale <strong>of</strong> flat, not being a service transaction, service tax can not be levied.‣ Constitutional validity:• Schedule VII to the Constitution lists out the subject matter <strong>of</strong> taxation byCentral and State Governments:• List I – Union List• List II – State List• List III – Concurrent List• Entry 97 <strong>of</strong> Union list is a residuary entry which empowers Central Governmentto levy tax on items not appearing in State List or Concurrent List.N.K.Sheth & Company <strong>25</strong>Validity <strong>of</strong> Service Tax Levy on Sale <strong>of</strong> Flats/Units 2/4• Central Government levy service tax under Residuary Entry 97.• Taxation <strong>of</strong> Immovable property falls under State List <strong>of</strong> taxation.• It, therefore, can not fall under residuary Entry 97 <strong>of</strong> Union List.• Central Government is, therefore, constitutionally incompetent to levy tax onSale <strong>of</strong> property under Residuary Entry 97 <strong>of</strong> Union List.‣ Honorable Supreme Court in the case <strong>of</strong> Bharat Sanchar Nigam Limited Vs Union <strong>of</strong>India [(2006) 2 STR 161 (SC)] held as under:• Total value taxed under various legislation should not exceed transaction value• Double taxation arising out <strong>of</strong> overlapping jurisdiction <strong>of</strong> State and CentralGovernment is not permissible.• Levy <strong>of</strong> service tax on flat sale is not in consonance with law laid down bythe Supreme Court as – State Government collects stamp duty and registration fees on sale <strong>of</strong> flat.N.K.Sheth & Company 2613
N. K. SHETH & COMPANYValidity <strong>of</strong> Service Tax Levy on Sale <strong>of</strong> Flats/Units 3/4 Central Government collects service tax on sale <strong>of</strong> flat. Base value suffering tax is much higher than actual transaction value.‣ Levy is not in consonance with principle laid down by Gauhati High Court in MegusConstruction (P) Ltd Vs Union <strong>of</strong> India 2008 (<strong>11</strong>) STR 2<strong>25</strong>, wherein it was held that:• Builder constructs the property on his own account.• It amounts to self service.• Allottee is a purchaser <strong>of</strong> immovable property. He is not a service recipient.• In absence <strong>of</strong> service provider and service recipient relationship, no service taxis leviable on sale <strong>of</strong> flat.‣ Absence <strong>of</strong> valuation mechanism:• Sale <strong>of</strong> flat / commercial unit is a composite deal for transfer <strong>of</strong> rights in landand structure.• Sale value consists <strong>of</strong> land value, material cost and service cost.N.K.Sheth & Company 27Validity <strong>of</strong> Service Tax Levy on Sale <strong>of</strong> Flats/Units 4/4• No mechanism is provided under legislation to workout value <strong>of</strong> taxableservice.• In absence <strong>of</strong> proper valuation mechanism, charging Section fails.- CIT vs. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC).‣ Levy is not in consonance with the principle laid down by Honorable Supreme Courtin Ganon Dunkerly’s case [9 STC 353] for taxing indivisible composite contract.‣ Substantial charge is created by way <strong>of</strong> insertion <strong>of</strong> explanation. It is litigative issuewhether the scope <strong>of</strong> taxation can be increased significantly through an explanation.‣ Levy is arbitrary and discriminatory in nature. It discriminates between two classes<strong>of</strong> builders:• Builder selling the property on booking basis.• Builder selling the property after completion.N.K.Sheth & Company 2814
N. K. SHETH & COMPANYPresent Status <strong>of</strong> Litigation‣ The High Courts <strong>of</strong> all the states are flooded with writ petitions challenging the levy<strong>of</strong> service tax on sale <strong>of</strong> flats / units.‣ Honorable Bombay High Court has admitted many writ petitions. The mostprominent being writ petition filed by Maharashtra Chamber <strong>of</strong> Housing Industry(MCHI). Hearing <strong>of</strong> the above petition for final disposal is postponed by High Courtto later date with following directions:• No coercive steps shall be taken against petitioners for recovery <strong>of</strong> service taxin relation to provisions in question .• Assessment may proceed in accordance with law.‣ Honorable Madras High Court has passed similar order in writ <strong>of</strong> A P Ravi Vs Union<strong>of</strong> India [2010-TIOL-604-HC-MAD-ST].‣ Punjab & Haryana High Court in M/s G S Promoters Vs Union <strong>of</strong> India [2010-TIOL-813] upheld constitutional validity <strong>of</strong> service tax levy on builders and developersN.K.Sheth & Company 29Implications <strong>of</strong> MCHI Interim Order‣ The order is an interim orders and not the final one.‣ Department is barred from taking coercive action against petitioners for recovery <strong>of</strong>tax till the matter is finally decided.‣ Protection <strong>of</strong> this interim order is available only to the petitioners or the members <strong>of</strong>the petitioner association.‣ Court has not granted general protection.‣ Non-petitioners can not take shelter <strong>of</strong> / recourse to this interim order.‣ Applicability <strong>of</strong> impugned provisions has not been stayed by the Court.‣ Liability to pay service tax under impugned provisions is still alive.‣ Even for petitioners, the assessment may proceed in accordance with law. .N.K.Sheth & Company 3015
N. K. SHETH & COMPANYPreferred Location – Section 65(105)(zzzzu)‣ Any Service Provided or to be provided to a buyer,‣ by a builder (including his authorized person) <strong>of</strong>:• a residential complex• or a commercial complex‣ for providing preferential location• “preferential location” would mean any location having extra advantage whichattracts extra payment over and above the basic sale price.‣ or development <strong>of</strong> complex,but does not include services covered under :• Management , Maintenance and repair category (zzg),• Commercial or Industrial Construction (zzq),• Residential Construction Service Category (zzh)• and in relation to parking place.N.K.Sheth & Company 31Preferential Location Services – Coverage 1/2‣ TRU Clarification No.334/1/1010-TRU dated 26.02.2010• Prime or preferential location charges such as: Sea facing flat / units Park facing flat / units Corner flat / units Higher floors flat / units Vastu appraised flat / units; Lucky numbers flat / units• Internal or external development charges collected for: Development / maintenance <strong>of</strong> park Laying sewerage pipe lines; Laying water pipe lines Providing access roads Fire fighting installation charges; Power backup charges• Excluding amount collected on behalf <strong>of</strong> statutory authorities.N.K.Sheth & Company 3216
N. K. SHETH & COMPANYPreferential Location Services – Coverage 2/2‣ Specific exclusion• Management, maintenance or repair falling U/s. 65(105)(zzg).• Commercial or Industrial Construction falling U/s. 65(105)(zzq).• Construction <strong>of</strong> complex falling U/s. 65(105)(zzzh).• Amount received towards parking space.‣ If complex is not a residential complex as defined U/s.65(91a), services rendered inrespect <strong>of</strong> unit in such a complex is not liable to service tax.‣ Commercial as well as residential units are covered.‣ Under construction as well as completed flats / units are covered.‣ Builder is not entitled to any abatement.‣ Effective tax rate would be 10.30%.‣ Debatable issue – amount received by builder is a part <strong>of</strong> sale consideration <strong>of</strong> flat /unit, taxable under “Construction Category” and not under this category,N.K.Sheth & Company 33FAQs‣ Please refer to case studies No. 1 & 2.‣ What are service tax implications in redevelopment project?‣ Stamp duty valuation <strong>of</strong> units is higher by 20% than agreement value. What are theservice tax implications?‣ Where the builder collects cash component (unaccounted consideration) from thecustomer, what are the implications in terms <strong>of</strong> service tax, interest, penalty andprosecution?‣ Who is liable to bear service tax, builder or buyer?‣ In case where builder fails to pay service tax, whether authority can recover it fromthe buyers?‣ In case where builder pays service tax with interest, whether interest can berecovered from buyers?N.K.Sheth & Company 3417
N. K. SHETH & COMPANYFAQs‣ Whether adjustment or refund <strong>of</strong> service tax is permissible on cancellation <strong>of</strong>allotment / deal?‣ Where builder recovers value <strong>of</strong> land separately, whether abatement can be claimedon amount charged for structure?‣ Whether buyer <strong>of</strong> the flat / <strong>of</strong>fice can claim CENVAT credit <strong>of</strong> service tax paid?‣ Whether builder can claim CENVAT credit <strong>of</strong> input service tax against service taxliability on sale <strong>of</strong> flats / units?N.K.Sheth & Company 35Case Study 1 – Service tax on sale <strong>of</strong> commercial unitsFacts Matrix:‣ The occupation certificate for ground floor was received on 28.02.2010.‣ The completion certificate for entire project is received on 12.08.2010.‣ The project (with exception <strong>of</strong> ground floor) was completed to the extent <strong>of</strong> 80% on30.06.2010.UNITSSOLDAGREEMENT /ALLOTMENTDATEVALUEPROGRESSPAYMENT DUETILL 30.06.2010PAYMENT RECEIVED<strong>25</strong> 10.03.2009 <strong>25</strong> Cr Nil On agreement execution (<strong>25</strong> Cr)5 Allotment Letter 5 Cr Nil On commencement <strong>of</strong> the Project[2008-09] ](5 Cr)10 on 30.06.2009 10 Cr 10 Cr Before 30.06.2010 (9Cr)GroundFloorOn 15.07.2010 (1 Cr)N.K.Sheth & Company 3618
N. K. SHETH & COMPANYCase Study 1 – Service tax on sale <strong>of</strong> commercial unitsUNITSSOLDAGREEMENT /ALLOTMENTDATEVALUEPROGRESSPAYMENT DUETILL 30.06.2010PAYMENT RECEIVED20 07.05.2010 <strong>25</strong> Cr 20 Cr Before 30.06.2010 (12 Cr)Cheque received on 30.06.2010(3 Cr) [Deposited on 05.07.2010]01.07.2010 to 12.08.2010 (5 Cr)On 30.08.2010 (5 Cr)1 15.06.2010 1.5 Cr 1 Cr Entire amount paid by 6 post dated <strong>of</strong> Rs<strong>25</strong> Lakhs to be deposited over six months.10 01.07.2010 15 Cr Nil On 30.08.2010 (15 Cr)10 05.08.2010 20 Cr Nil 05.08.2010 (16 Cr)13.08.2010 (4 Cr)19 30.08.2010 38 Cr Nil Full payment received on execution <strong>of</strong> theagreement‣ Will it make any difference if this were to be a ‘residential complex’?N.K.Sheth & Company 37Case Study 2 – Preferred Location ServicesSR NO PARTICULARS AMOUNT(Rs.)1 Society Membership Fees 12 Share Capital Contribution <strong>25</strong>03 Electricity meter deposit 10,0004 Water meter deposit 5,0005 Society formation charges 10,0006 Contribution towards construction <strong>of</strong> Swimming pool 10,00,0007 Contribution towards or one time members fees for Club 7,51,0008 Allotted parking space in stilt 5,50,0009 Allotted parking space in open compound 1,00,00010 Advance towards maintenance and Municipal taxes till formation <strong>of</strong> society 3,60,000What are the service tax implications <strong>of</strong> above referred receipts by builder?N.K.Sheth & Company 3819
N. K. SHETH & COMPANYWords <strong>of</strong> Caution‣ Views expressed are the personal views <strong>of</strong> faculty based on his interpretation <strong>of</strong>law.‣ Application <strong>of</strong> various provisions and its implications will vary on facts <strong>of</strong> the caseand law prevailing on relevant time.‣ Participants / Members are advised to take cognizance <strong>of</strong> above while applying thecontents <strong>of</strong> this presentation to specific case / issue.‣ This educational meeting is arranged with a clear understanding that neither Facultynor <strong>WIRC</strong> / Study Circle will be responsible for any error, omission, commissionand result <strong>of</strong> any action taken by a member / participant or anyone on the basis <strong>of</strong>this presentation.N.K.Sheth & Company 39THANK YOUN.K.Sheth & Company 4020