The document discusses service tax implications for real estate transactions in India. It provides definitions related to service tax law and clarifies that construction of a complex where money is received before issue of completion certificate is a declared taxable service. It examines various cases related to service tax applicability in situations like joint development agreements, construction for landowners, and timing of capital gains. Key points discussed include determining the service portion for works contracts and implications of a Supreme Court decision referring the Raheja Development case to a larger bench.
The document discusses GST implications for works contracts and real estate transactions in India. Some key points:
- Works contracts are treated as supply of services under GST and taxed at 18%, with some works contracts taxed at 12%. Labour contracts are generally taxed at 18%.
- Builders must pay GST on sale of flats/villas if any amount is received prior to completion certificate. The rate is 18% with a 1/3 deduction for land value.
- Landlord share of construction is treated as supply of service by the builder and taxed at 18%. Valuation methods include open market value or cost.
- Landlords must also pay GST if amounts are received
The document provides an overview of the Real Estate (Regulation and Development) Act in India. It discusses the objectives of establishing transparency and protecting consumer interests. It also defines key terms like promoter, real estate project, allottee. The important authorities under the act are the Real Estate Regulatory Authority and Real Estate Appellate Tribunal. Registration of real estate projects with RERA is mandatory, except for certain exempted projects. The process of registration and required documents are also outlined.
Declared Services (Section 66E of Finance Act, 1994)Rajat Agrawal
A presentation on Section 66E of Finance Act, 1994 - Declared Services. The presentation was made in an attempt to be simple, yet comprehensive for seminar purposes.
IMPORTANT DEFINITIONS of terms UNDER CGST LAWSundar B N
This document provides definitions for key terms under the Central Goods and Services Tax (CGST) law in India. It defines aggregate turnover, business, casual taxable person, composite supply, consideration, continuous supply of goods/services, electronic commerce operator, fixed establishment, goods, India, input tax, non-taxable supply, person, principal supply, recipient, reverse charge, services, supplier, taxable person, and taxable supply. The definitions clarify the scope and applicability of these important concepts under the CGST law.
Presentation on CRITICAL ISSUES IN CAPITAL GAINS TAXATION
organised by Tax Practitioner's Association, Indore and ICAI Indore
By
CA. Pankaj Shah
Former Chairman Indore branch of CIRC of ICAI
LLB(Hons), BBA, CS, FCA, DISA(ICA)
Service tax on works contract (Pre-Negative List)sandesh mundra
This ppt gives a glimpse of service tax payment in india as applicable to works contractors before the negative list. This is very relevant to builders and developers. Service Tax posers and illustrations were also covered by the speaker during the presentation.
This ppt is a comprehensive presentation on various aspects for the entities working in the construction domain. Starting from Tendering to Budgeting and going on to indirect tax aspects like VAT and service Tax.
A review of the raft of amendments under the Building and Construction Industry Security of Payment Amendment Act 2018 [NSW] and a discussion about their consequences with Charles Brannen, Robert Riddell and Robert Sundercombe
The document discusses GST implications for works contracts and real estate transactions in India. Some key points:
- Works contracts are treated as supply of services under GST and taxed at 18%, with some works contracts taxed at 12%. Labour contracts are generally taxed at 18%.
- Builders must pay GST on sale of flats/villas if any amount is received prior to completion certificate. The rate is 18% with a 1/3 deduction for land value.
- Landlord share of construction is treated as supply of service by the builder and taxed at 18%. Valuation methods include open market value or cost.
- Landlords must also pay GST if amounts are received
The document provides an overview of the Real Estate (Regulation and Development) Act in India. It discusses the objectives of establishing transparency and protecting consumer interests. It also defines key terms like promoter, real estate project, allottee. The important authorities under the act are the Real Estate Regulatory Authority and Real Estate Appellate Tribunal. Registration of real estate projects with RERA is mandatory, except for certain exempted projects. The process of registration and required documents are also outlined.
Declared Services (Section 66E of Finance Act, 1994)Rajat Agrawal
A presentation on Section 66E of Finance Act, 1994 - Declared Services. The presentation was made in an attempt to be simple, yet comprehensive for seminar purposes.
IMPORTANT DEFINITIONS of terms UNDER CGST LAWSundar B N
This document provides definitions for key terms under the Central Goods and Services Tax (CGST) law in India. It defines aggregate turnover, business, casual taxable person, composite supply, consideration, continuous supply of goods/services, electronic commerce operator, fixed establishment, goods, India, input tax, non-taxable supply, person, principal supply, recipient, reverse charge, services, supplier, taxable person, and taxable supply. The definitions clarify the scope and applicability of these important concepts under the CGST law.
Presentation on CRITICAL ISSUES IN CAPITAL GAINS TAXATION
organised by Tax Practitioner's Association, Indore and ICAI Indore
By
CA. Pankaj Shah
Former Chairman Indore branch of CIRC of ICAI
LLB(Hons), BBA, CS, FCA, DISA(ICA)
Service tax on works contract (Pre-Negative List)sandesh mundra
This ppt gives a glimpse of service tax payment in india as applicable to works contractors before the negative list. This is very relevant to builders and developers. Service Tax posers and illustrations were also covered by the speaker during the presentation.
This ppt is a comprehensive presentation on various aspects for the entities working in the construction domain. Starting from Tendering to Budgeting and going on to indirect tax aspects like VAT and service Tax.
A review of the raft of amendments under the Building and Construction Industry Security of Payment Amendment Act 2018 [NSW] and a discussion about their consequences with Charles Brannen, Robert Riddell and Robert Sundercombe
This document discusses statutory and contractual adjudication in Hong Kong. It provides an overview of the development of security of payment legislation in Hong Kong, including reports and public consultations from 2001 to 2021. It outlines the application and requirements of the proposed security of payment legislation, including payment claim processes, maximum payment periods, adjudication procedures, and the adjudicator's jurisdiction. It also discusses recent proposals to implement aspects of security of payment in public works contracts prior to the enactment of legislation.
1. The document discusses the development of security of payment legislation (SOPL) and contractual adjudication in Hong Kong construction projects. It outlines key milestones in SOPL's development from 2001 to the present and proposed additions to public works contracts to facilitate timely processing of payments.
2. It summarizes recent developments in contractual adjudication, including requirements for payment responses, conditional payment provisions, and adjudicator decisions. Adjudicators would be appointed by adjudication nominating bodies under proposed legislation.
3. The document presents draft articles related to adjudication procedures, including appointment of adjudicators, payment claims, withdrawal of adjudication, and eligibility of adjudicators. It focuses on preventing "
UK Adjudicators are a leading Adjudicator Nominating Body (ANB )for the construction and engineering industries.
Panel members include retired judges, solicitors, barristers, engineers, surveyors and architects.
A Presentation On Construction & GTA Services – An Overview 29th November...Agarwal sanjiv & Co
The document provides an overview of a seminar on construction and GTA services. It covers taxation of services in India historically and currently, including the shift to a negative list approach. It also discusses the taxation of construction services specifically, including what activities are considered construction, works contracts, and exemptions for services provided to government. Key highlights include the definition of construction activities as taxable services and an overview of the valuation rules for the taxable service portion of works contracts.
This document discusses statutory adjudication in contracts for professional services in Hong Kong. It provides background on security of payment legislation in other countries and past surveys on payment practices. It then outlines key features of statutory adjudication, including that it provides a fast, inexpensive, and temporary binding dispute resolution process. The document discusses what types of contracts and construction activities would be covered under the proposed legislation in Hong Kong, including value thresholds. It also summarizes the adjudication procedure and rights around payment periods, suspensions for non-payment, and ineffective payment provisions.
This document summarizes a California Supreme Court case regarding legal challenges to building inspection and permit fees imposed by the City of Rancho Cucamonga. The plaintiff, Barratt American, Inc., paid over $143,000 in permit and inspection fees for a housing development project and alleged the fees were excessive. The court had to determine the appropriate remedies and statute of limitations for such challenges. It concluded that building permit fees are regulatory fees not imposed on a development project, so sections 66020 and 66021 providing refund remedies do not apply. Instead, challenges are governed by sections 66014 and 66016, which provide a prospective fee reduction remedy subject to the 120-day statute of limitations in section 66022.
The document discusses the valuation of assets for wealth tax purposes in India. It outlines the steps to value a self-occupied residential building, including calculating the gross maintainable rent (GMR) and net maintainable rent (NMR), capitalizing the NMR, and making adjustments for unbuilt area and unearned increase. It also provides an example calculation valuing a leasehold house. The objective is to understand asset valuation and the filing and assessment of wealth tax returns.
(1) Recent amendments were made to the Point of Taxation Rules for service tax in India, effective April 1, 2011, with some optionality allowed until June 30, 2011. (2) Key changes include specifying the date of invoice or completion of service/milestone as the point of taxation, allowing 14 days to issue invoices, and classifying certain services like construction as "continuous supply of services." (3) Five services - telecom, construction, internet, works contract, and residential complex construction - are specifically notified as continuous supply services.
INCOME TAX – INTERNATIONAL TAXATION
Tax Residency Certificate – DTAA Benefits
The Punjab and Haryana High Court, has held that Tax Residency Certificate issued by a foreign country can be considered valid for the purpose of claiming benefit under the Indo – Mauritius DTAA. The Court reversed the AAR Ruling and relied upon CBDT Circular No. 789 to the effect that certificate of residence issued by the Mauritius Authorities constitute sufficient evidence for residential status.
This document discusses the partial reverse charge mechanism for works contracts under Indian service tax law. Key points:
1) For certain works contracts, the liability to pay service tax is shared between the service provider and service recipient. For service portions of works contracts, the recipient must pay 50% of the service tax and the provider pays the remaining 50%.
2) The value of the service portion of a works contract is determined by subtracting the value of transferred goods from the total contract value. For certain types of works contracts, the service portion is deemed to be 40-70% of the total contract value.
3) The introduction of partial reverse charge for works contracts increases the tax burden on service recipients while aiming
The document discusses various topics related to CENVAT (Central Value Added Tax), including:
- CENVAT aims to levy tax only on value added at each stage.
- VAT allows credit/set off of all taxes on all bought out items, while CENVAT only allows credit of excise duty and additional duties on inputs, capital goods, and input services for manufacturers and service providers.
- Those eligible for CENVAT credit include manufacturers and service providers, and the credit covers taxes like basic excise duty, special additional duty, education cess, and service tax.
The Government has enacted the CGST (Amendment) Act, 2018, the IGST (Amendment) Act, 2018, by publication in official Gazette to amend the respective GST Acts.
In this regard, we have captured major amendments in CGST Act, 2017 and IGST Act, 2017 for your perusal
The document contains suggested answers to intermediate examination questions for applied indirect taxation from December 2011. It includes answers to multiple choice, true/false, and computational questions related to topics like central excise duty, customs duty, central sales tax, and service tax. Suggested calculations and explanations are provided for questions involving the computation of tax liabilities and credits.
The questions and answers cover various provisions and concepts in indirect tax laws like the eligibility criteria for VAT composition scheme, provisions for rectification of service tax orders, the definition of exempted goods under CENVAT rules, and the computation of VAT liability and input tax credit based on purchase and sales details.
Section 65(105)(zzzh) provides for a levy of service tax on services in relation to ‘construction of complex’ and an explanation was added by Finance Act, 2010.
Issues in VAT & ST in Construction Industryumang_soni91
The document discusses various types of agreements in the construction business and their tax treatment. It analyzes whether certain arrangements constitute works contracts or sales under the MVAT Act. Key points analyzed include whether consideration is in monetary terms, timing of property transfer, and who the construction is being performed for or on behalf of. Judicial precedents have interpreted similar arrangements differently, creating confusion around tax liability for construction activities.
The document discusses the taxability of capital gains in the context of joint development agreements under Indian tax law. It summarizes key court decisions which have found that transfer occurs upon execution of the agreement if possession is handed over, or upon a later transaction granting possession if specified in the agreement. Where transfer triggers tax, the landowner can use fair market value or Section 54 exemption. Transfer generally requires allowing possession in part performance of an agreement to develop the property.
Real estate transactions Under taxing lawGST Law India
The following presentation enumerates the taxing structure for real estate transactions and gst rates along with a comparison of the previous tax structure with the present structure under GST. it also discusses service tax on work contracts, service tax on renting, credit linked subsidy scheme, valuation of taxable supply, input tax credit, exemptions for builders, housing society.
1) Service tax is applicable to property that is still under construction, where construction is not complete and the builder has not received an occupancy or completion certificate.
2) The service tax is levied on the builder, who is responsible for collecting it from the buyer as part of the property purchase price.
3) There is no service tax applicable on resale properties, as these would have already received completion certificates at the time of their initial sale.
This document discusses various practical problems and issues regarding the levy of service tax on construction and real estate activities in India. It begins by outlining the history of when service tax was levied on different construction and real estate services. It then lists numerous questions and issues that remain unclear or disputed regarding how and when service tax applies in various situations involving construction contracts, real estate sales, and related activities. The document focuses on defining key terms, analyzing court decisions, and seeking clarity on the complex tax treatment of the construction and real estate sector in India.
Real estate construction GST impact-great compilation by CA Shiv AshishShakir Shaikh
1) Construction and real estate contracts related to immovable property like buildings and civil structures are considered works contracts and treated as services under GST.
2) EMIs or advance payments for under-construction homes will attract GST, but supply of land and buildings where payment is received only after completion will be exempt from GST.
3) The tax rate for most construction and real estate contracts is estimated to be 18%, and transitional provisions have been made to allow credit for taxes already paid on stocks and contracts.
This document discusses statutory and contractual adjudication in Hong Kong. It provides an overview of the development of security of payment legislation in Hong Kong, including reports and public consultations from 2001 to 2021. It outlines the application and requirements of the proposed security of payment legislation, including payment claim processes, maximum payment periods, adjudication procedures, and the adjudicator's jurisdiction. It also discusses recent proposals to implement aspects of security of payment in public works contracts prior to the enactment of legislation.
1. The document discusses the development of security of payment legislation (SOPL) and contractual adjudication in Hong Kong construction projects. It outlines key milestones in SOPL's development from 2001 to the present and proposed additions to public works contracts to facilitate timely processing of payments.
2. It summarizes recent developments in contractual adjudication, including requirements for payment responses, conditional payment provisions, and adjudicator decisions. Adjudicators would be appointed by adjudication nominating bodies under proposed legislation.
3. The document presents draft articles related to adjudication procedures, including appointment of adjudicators, payment claims, withdrawal of adjudication, and eligibility of adjudicators. It focuses on preventing "
UK Adjudicators are a leading Adjudicator Nominating Body (ANB )for the construction and engineering industries.
Panel members include retired judges, solicitors, barristers, engineers, surveyors and architects.
A Presentation On Construction & GTA Services – An Overview 29th November...Agarwal sanjiv & Co
The document provides an overview of a seminar on construction and GTA services. It covers taxation of services in India historically and currently, including the shift to a negative list approach. It also discusses the taxation of construction services specifically, including what activities are considered construction, works contracts, and exemptions for services provided to government. Key highlights include the definition of construction activities as taxable services and an overview of the valuation rules for the taxable service portion of works contracts.
This document discusses statutory adjudication in contracts for professional services in Hong Kong. It provides background on security of payment legislation in other countries and past surveys on payment practices. It then outlines key features of statutory adjudication, including that it provides a fast, inexpensive, and temporary binding dispute resolution process. The document discusses what types of contracts and construction activities would be covered under the proposed legislation in Hong Kong, including value thresholds. It also summarizes the adjudication procedure and rights around payment periods, suspensions for non-payment, and ineffective payment provisions.
This document summarizes a California Supreme Court case regarding legal challenges to building inspection and permit fees imposed by the City of Rancho Cucamonga. The plaintiff, Barratt American, Inc., paid over $143,000 in permit and inspection fees for a housing development project and alleged the fees were excessive. The court had to determine the appropriate remedies and statute of limitations for such challenges. It concluded that building permit fees are regulatory fees not imposed on a development project, so sections 66020 and 66021 providing refund remedies do not apply. Instead, challenges are governed by sections 66014 and 66016, which provide a prospective fee reduction remedy subject to the 120-day statute of limitations in section 66022.
The document discusses the valuation of assets for wealth tax purposes in India. It outlines the steps to value a self-occupied residential building, including calculating the gross maintainable rent (GMR) and net maintainable rent (NMR), capitalizing the NMR, and making adjustments for unbuilt area and unearned increase. It also provides an example calculation valuing a leasehold house. The objective is to understand asset valuation and the filing and assessment of wealth tax returns.
(1) Recent amendments were made to the Point of Taxation Rules for service tax in India, effective April 1, 2011, with some optionality allowed until June 30, 2011. (2) Key changes include specifying the date of invoice or completion of service/milestone as the point of taxation, allowing 14 days to issue invoices, and classifying certain services like construction as "continuous supply of services." (3) Five services - telecom, construction, internet, works contract, and residential complex construction - are specifically notified as continuous supply services.
INCOME TAX – INTERNATIONAL TAXATION
Tax Residency Certificate – DTAA Benefits
The Punjab and Haryana High Court, has held that Tax Residency Certificate issued by a foreign country can be considered valid for the purpose of claiming benefit under the Indo – Mauritius DTAA. The Court reversed the AAR Ruling and relied upon CBDT Circular No. 789 to the effect that certificate of residence issued by the Mauritius Authorities constitute sufficient evidence for residential status.
This document discusses the partial reverse charge mechanism for works contracts under Indian service tax law. Key points:
1) For certain works contracts, the liability to pay service tax is shared between the service provider and service recipient. For service portions of works contracts, the recipient must pay 50% of the service tax and the provider pays the remaining 50%.
2) The value of the service portion of a works contract is determined by subtracting the value of transferred goods from the total contract value. For certain types of works contracts, the service portion is deemed to be 40-70% of the total contract value.
3) The introduction of partial reverse charge for works contracts increases the tax burden on service recipients while aiming
The document discusses various topics related to CENVAT (Central Value Added Tax), including:
- CENVAT aims to levy tax only on value added at each stage.
- VAT allows credit/set off of all taxes on all bought out items, while CENVAT only allows credit of excise duty and additional duties on inputs, capital goods, and input services for manufacturers and service providers.
- Those eligible for CENVAT credit include manufacturers and service providers, and the credit covers taxes like basic excise duty, special additional duty, education cess, and service tax.
The Government has enacted the CGST (Amendment) Act, 2018, the IGST (Amendment) Act, 2018, by publication in official Gazette to amend the respective GST Acts.
In this regard, we have captured major amendments in CGST Act, 2017 and IGST Act, 2017 for your perusal
The document contains suggested answers to intermediate examination questions for applied indirect taxation from December 2011. It includes answers to multiple choice, true/false, and computational questions related to topics like central excise duty, customs duty, central sales tax, and service tax. Suggested calculations and explanations are provided for questions involving the computation of tax liabilities and credits.
The questions and answers cover various provisions and concepts in indirect tax laws like the eligibility criteria for VAT composition scheme, provisions for rectification of service tax orders, the definition of exempted goods under CENVAT rules, and the computation of VAT liability and input tax credit based on purchase and sales details.
Section 65(105)(zzzh) provides for a levy of service tax on services in relation to ‘construction of complex’ and an explanation was added by Finance Act, 2010.
Issues in VAT & ST in Construction Industryumang_soni91
The document discusses various types of agreements in the construction business and their tax treatment. It analyzes whether certain arrangements constitute works contracts or sales under the MVAT Act. Key points analyzed include whether consideration is in monetary terms, timing of property transfer, and who the construction is being performed for or on behalf of. Judicial precedents have interpreted similar arrangements differently, creating confusion around tax liability for construction activities.
The document discusses the taxability of capital gains in the context of joint development agreements under Indian tax law. It summarizes key court decisions which have found that transfer occurs upon execution of the agreement if possession is handed over, or upon a later transaction granting possession if specified in the agreement. Where transfer triggers tax, the landowner can use fair market value or Section 54 exemption. Transfer generally requires allowing possession in part performance of an agreement to develop the property.
Real estate transactions Under taxing lawGST Law India
The following presentation enumerates the taxing structure for real estate transactions and gst rates along with a comparison of the previous tax structure with the present structure under GST. it also discusses service tax on work contracts, service tax on renting, credit linked subsidy scheme, valuation of taxable supply, input tax credit, exemptions for builders, housing society.
1) Service tax is applicable to property that is still under construction, where construction is not complete and the builder has not received an occupancy or completion certificate.
2) The service tax is levied on the builder, who is responsible for collecting it from the buyer as part of the property purchase price.
3) There is no service tax applicable on resale properties, as these would have already received completion certificates at the time of their initial sale.
This document discusses various practical problems and issues regarding the levy of service tax on construction and real estate activities in India. It begins by outlining the history of when service tax was levied on different construction and real estate services. It then lists numerous questions and issues that remain unclear or disputed regarding how and when service tax applies in various situations involving construction contracts, real estate sales, and related activities. The document focuses on defining key terms, analyzing court decisions, and seeking clarity on the complex tax treatment of the construction and real estate sector in India.
Real estate construction GST impact-great compilation by CA Shiv AshishShakir Shaikh
1) Construction and real estate contracts related to immovable property like buildings and civil structures are considered works contracts and treated as services under GST.
2) EMIs or advance payments for under-construction homes will attract GST, but supply of land and buildings where payment is received only after completion will be exempt from GST.
3) The tax rate for most construction and real estate contracts is estimated to be 18%, and transitional provisions have been made to allow credit for taxes already paid on stocks and contracts.
This document provides a summary of various tax law updates across Income Tax, Service Tax, Excise, Customs and VAT for November 2015 from K. Vaitheeswaran & Co., Advocates and Tax Consultants. Key highlights include the Bangalore Tribunal holding that software development and software product companies cannot be comparable for transfer pricing, the Karnataka High Court allowing foreign tax credit on Section 10A income, and the Supreme Court ruling that landing and parking charges for aircraft are not rent.
The document discusses the Kerala Building Tax Act of 1975 and subsequent amendments. Some key points:
- The Act empowers the government to charge building tax based on the capital value of land and buildings. Later amendments changed this to be based on the plinth area instead.
- Exemptions are provided for certain types of buildings like those owned by governments or used for religious/charitable purposes. Some exemptions require buildings to meet certain criteria.
- The assessing authority is the Tahsildar. Appeals can be made to the Revenue Divisional Officer. Further revisions can be made by the District Collector or Government.
- Tax is payable by the building owner. Returns must be
This document discusses various service tax issues related to the construction industry in India. It begins by defining the term "service" and what constitutes a declared service under the law. It then addresses specific issues around taxation of construction services, joint development agreements, valuation mechanisms, exemptions and abatements. Key points discussed include the taxability of residential and commercial construction, renting of immovable property, and site formation works. Architect services and other ancillary construction services are also covered. The document aims to provide clarity around the service tax implications of common construction related activities in India.
This document discusses GST implications for works contracts and real estate transactions in India. Some key points:
- Works contracts are treated as supply of services under GST. Rates are 18% generally, but some specified contracts are 12%. Labour contracts are 18% except for certain exemptions.
- For builders selling flats/villas, the activity is treated as supply of service if any amount is received before completion. Rate is 18% with 1/3 deduction for land.
- For landlord share of construction, it is a works contract with the non-monetary consideration of land. Valuation methods are discussed and rate would be 18%.
- Plot sales are not taxable generally but development
This document provides an overview of key concepts related to the Goods and Services Tax (GST) regime in India, including the concept of supply, nature of supply, GST rates and exemptions, input tax credit, returns, documentation, and tax deducted at source. It defines supply, explains the dual GST structure of CGST and SGST/IGST, and clarifies whether transactions constitute intra-state or inter-state supply. Schedules are referenced that specify activities treated as supply and clarify supply of goods versus services. The time of supply is also summarized based on the type of transaction.
Embargo on levy of service tax on flats under composite contracts - Dr Sanjiv...D Murali ☆
Embargo on levy of service tax on flats under composite contracts - Dr Sanjiv Agarwal - Article published in Business Advisor, dated June 25, 2016 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Tweeted on www.twitter.com/BusinessAdvDM
Supreme Court Judgement - L&T / K Raheja (VAT on Builders)sandesh mundra
This presentation takes one through the details of recent Supreme Court Judgement in the case of Larsen & Toubro, which was a review of K Raheja Judgement. The judgement has a severe impact on the tax aspects of builders and real estate developers. It redefines the definition of works contract and levy of VAT on sale of flats and commercial premises
Will secured creditor have priority over income-tax arrears? - V. K. SubramaniD Murali ☆
Will secured creditor have priority over income-tax arrears? - V. K. Subramani - Article published in Business Advisor, dated October 10, 2016 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Note of service tax on developers june 2013ANAND GAWADE
1. Construction of residential or commercial buildings is subject to service tax unless the entire consideration is received after issuance of a completion certificate.
2. The service tax rate depends on the carpet area and selling price of residential units - abatement of 75% for units with carpet area less than 2000 sqft and selling price less than Rs. 1 crore, and 70% otherwise.
3. The taxable value includes the fair market value of any goods or services provided by the buyer to the builder.
Indirect tax judicial precedents september 2016 (1)Ashish Chaudhary
The document provides a summary of recent indirect tax judicial precedents from September 2016. It discusses 12 cases from various High Courts and Tribunals. Key points from 3 cases include:
1) Service tax paid under mistaken belief cannot be retained by the government and a refund must be allowed.
2) Cenvat credit can be availed on the basis of an advisory note from head office as long as it is based on valid documents.
3) Advertisement expenditure incurred by dealers would not be included in the assessable value of the manufacturer in the absence of an enforceable legal right.
The document discusses taxation issues related to real estate developers and redevelopment projects.
1. It outlines the different stages of real estate development projects and discusses when income should be recognized for tax purposes - whether using the project completion method or percentage completion method.
2. It also discusses whether income from redevelopment projects should be taxed as business income or capital gains for the landowner participating in the project.
3. The document provides an overview of key sections of the Income Tax Act relating to taxation of real estate developers, capital gains, revenue recognition, and the powers of tax authorities to refer cases to valuation officers.
Transferable Development Rights (TDRs) allow land owners who surrender land for public projects to receive additional development rights that can be used or sold. There is debate around whether trading of TDRs is taxable under GST. TDRs have been considered a "benefit arising from land" by courts, making them immovable property. The sale of land is excluded from GST under Schedule III. Since TDRs are a benefit of land, their trading could be considered outside the scope of GST. However, due to conflicting judgments, developers are advised to pay GST on TDR trades and apply for refund until the tax treatment is clarified.
This document discusses the tax implications of redevelopment projects and transfer of development rights (TDR) in India.
1. Redevelopment of old structures involves complicated regulatory and tax issues for land owners, tenants, developers, and government agencies. The key tax question is whether amounts received from transferring TDR or allowing additional construction constitute taxable capital gains.
2. Amounts received by a housing society from transferring TDR are not taxable as capital gains, as the right to TDR is a no-cost capital asset acquired due to a change in development regulations rather than any expenditure.
3. Amounts received directly by society members from transferring TDR or allowing additional construction are also not taxable,
Similar to Icai rajkot - real estate - 08.06.2014 (20)
This document briefly explains the June compliance calendar 2024 with income tax returns, PF, ESI, and important due dates, forms to be filled out, periods, and who should file them?.
Sangyun Lee, 'Why Korea's Merger Control Occasionally Fails: A Public Choice ...Sangyun Lee
Presentation slides for a session held on June 4, 2024, at Kyoto University. This presentation is based on the presenter’s recent paper, coauthored with Hwang Lee, Professor, Korea University, with the same title, published in the Journal of Business Administration & Law, Volume 34, No. 2 (April 2024). The paper, written in Korean, is available at <https://shorturl.at/GCWcI>.
What are the common challenges faced by women lawyers working in the legal pr...lawyersonia
The legal profession, which has historically been male-dominated, has experienced a significant increase in the number of women entering the field over the past few decades. Despite this progress, women lawyers continue to encounter various challenges as they strive for top positions.
Guide on the use of Artificial Intelligence-based tools by lawyers and law fi...Massimo Talia
This guide aims to provide information on how lawyers will be able to use the opportunities provided by AI tools and how such tools could help the business processes of small firms. Its objective is to provide lawyers with some background to understand what they can and cannot realistically expect from these products. This guide aims to give a reference point for small law practices in the EU
against which they can evaluate those classes of AI applications that are probably the most relevant for them.
Synopsis On Annual General Meeting/Extra Ordinary General Meeting With Ordinary And Special Businesses And Ordinary And Special Resolutions with Companies (Postal Ballot) Regulations, 2018
1. K.VAITHEESWARAN
ADVOCATE & TAX CONSULTANT
Flat No.3, First Floor,
No.9, Thanikachalam Road,
T. Nagar,
Chennai - 600 017, India
Tel.: 044 + 2433 1029 / 4048
402, Front Wing,
House of Lords,
15/16, St. Marks Road,
Bangalore – 560 001, India
Tel : 080 22244854/ 41120804
Mobile: 98400-96876
E-mail : askvaithi@yahoo.co.uk, vaithilegal@yahoo.co.in
SERVICE TAX ON
REAL ESTATE TRANSACTIONS
2. Section 65B(44) defines “service” to mean any activity
carried out by a person for another for consideration and
includes a declared service, but shall not include –
(a) an activity which constitutes merely, -
(i) a transfer of title in goods or immovable property by
way of sale, gift or in any other manner;
(ii)such transfer, delivery or supply of any goods
which is deemed to be a sale within the meaning of
clause (29A) of article 366 of the Constitution; or
K.Vaitheeswaran - All Copyrights Reserved
3. Service includes a declared service but does not include an
activity of transfer of title in immovable property by way of
sale, gift or in any other manner.
Section 66E(b) while setting out declared services covers
construction of a complex, building, civil structure or 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.
Sale of an immovable property is excluded
Construction of a complex where monies are received before
issue of completion certificate is a declared service.
K.Vaitheeswaran - All Copyrights Reserved
4. No more complex definition of construction of complex
Whether Macro Marvel decision is still relevant?
Notification No. 25/2012 dated 20.06.2012 w.e.f. 01.07.2012
exempts services by way of construction, erection,
commissioning or installation of original works pertaining
to a single residential unit other than as a part of a
residential complex (Entry 14 (b)).
Residential complex is defined to mean “any complex
comprising of a building or buildings having more than one
single residential unit.”
Single residential unit means a self contained residential unit
which is designed for use wholly or principally for residential
purposes for one family.
K.Vaitheeswaran - All Copyrights Reserved
5. Original works means:
(i) all new constructions;
(ii) All types of additions and alterations to abandoned or
damaged structures on land that are required to make
them workable.
(iii) Erection, commissioning or installation of plant,
machinery or equipment or structures whether pre-
fabricated or otherwise.
K.Vaitheeswaran - All Copyrights Reserved
6. Activity Taxability
Construction of a complex comprising of
more than one residential unit
Taxable
Construction of a single bungalow of a
size of 5000 sq. ft. meant for a family
Not taxable
Construction of a two unit building with
separate floor plans and paid for
separately by two brothers
Taxable?
Construction of 50 villas in a gated
community
Taxable?
Alteration and re-modeling of an existing
single residential unit
Taxable if not in the nature of original
works
K.Vaitheeswaran - All Copyrights Reserved
7. Earlier provision required a complex to have more than 12
residential units.
New provision creates a liability for any construction of
complex unless it is a single residential unit.
Construction of a complex comprising of 6 apartments has
started on 01.01.2012 and 30% of the monies have been
received under agreements.
Martin Lottery decision.
No tax position
Proportionate tax position
Can monies received earlier now be subjected to tax based
on Point of Taxation Rules ?
K.Vaitheeswaran - All Copyrights Reserved
8. Determination of service tax liability for a developer
who receives money before issuance of completion
certificate.
In the earlier system developers were discharging
service tax on 33% of the value without cenvat
credit benefit under Notification No.1/2006.
K.Vaitheeswaran - All Copyrights Reserved
9. DESCRIPTION OF TAXABLE
SERVICE
PERCENTAGE CONDITIONS
Construction of a complex,
building, civil structure or a
part thereof, intended for a
sale to a buyer, wholly or
partly except where entire
consideration is received after
issuance of completion
certificate by the competent
authority.
(a)For a residential unit
satisfying both conditions
namely carpet area being less
than 2000 sft. and amount
charged being less than Rs.1
crore.
(b) Other than (a)
25
30
(i) CENVAT credit on inputs
used for providing the
taxable service has not
been taken under the
provisions of the CENVAT
Credit Rules, 2004.
(ii) The value of land is
included in the amount
charged from the service
receiver.
K.Vaitheeswaran - All Copyrights Reserved
10. Joint Venture
Different models
Monetary share / share of constructed area
Is the contractor liable to pay service tax on
construction done for the land owner?
K.Vaitheeswaran - All Copyrights Reserved
11. An agreement between the owner of a land and a builder for construction
of apartments and sale of those apartments so as to share the profits may
be a joint venture, if the agreement discloses an intent that both parties
shall exercise joint control over the construction/development and be
accountable to each other for their respective acts with reference to the
project.
On facts there is a contract for construction of an apartment and there is
consideration for such construction flowing from the land owner to the
builder (in the form of sale of undivided share in the land and permission to
construct and own the upper floors).
The land owner is the consumer, builder is the service provider.
12. Tax on same rate as charged on other buyers
Tax on average rate
Tax on construction cost
Tax payable by adopting value of UDS transferred
Decision of the Supreme Court – (Faqir Chand Gulati Vs.
Uppal Agencies Pvt. Ltd.) Consumer case.
K.Vaitheeswaran - All Copyrights Reserved
13. Chennai Tribunal in the case LCS City Makers Vs. CST (2012)
TIOL 618 has held that:
(a ) there is no infirmity in adopting value of the flats sold for
value of flats allotted to land owners.
(b) guideline value of land cannot be adopted.
(c) Contention that consideration received other than in the
form of money prior to 19.04.2006 not acceptable as
substantial part of service was provided after valuation rules
were notified.
K.Vaitheeswaran - All Copyrights Reserved
14. The Chennai Tribunal in the case of Aswini Apartments (unreported)
vide order dated 15.07.2013 on a similar issue remanded the matter back
to the adjudicating authority to give a ruling on the legal issues raised.
One of the legal issues raised was that in respect of land owner share the
consideration would be the notional value received for the value of
undivided share of land obtained from the land owner. This decision was
rendered after the decision of LCS.
The Commissioner (Appeals), Chennai in the case of Navin Housing and
Promoters Pvt. Ltd. in O-i-A No.209/2010 dated 10.12.2010 has held
that where the land owner is given any constructed area as part of the
joint venture, service tax is not applicable on landowner share.
Board Circular dated 151/2/2012 dated 10.02.2012 - the value of similar
flats as are sold nearer to the date on which land is being made available
15. Developer is likely to recover the service tax
in respect of the apartments allocated to the
landowner.
If landowner markets these apartments prior
to issue of completion certificate and receives
money in advance, service tax exposure.
If landowner executes a single sale deed for
the apartment and the land?
K.Vaitheeswaran - All Copyrights Reserved
16. Where the document that is executed is in the nature of an
agreement for transfer and possession is handed over as part
performance as contemplated in Section 53A of the Transfer
of Property Act, 1882 then there is a transfer and capital
gains would arise immediately. This would be evident in a
situation where the developer settles the consideration in
the form of money or monies worth on an outright basis and
the land owner has no relevance or say in the development
work.
K.Vaitheeswaran - All Copyrights Reserved
17. Bombay High Court in Chaturbhuj Dwarkadas Kapadia Vs. CIT (2003) 260 ITR
491, has in the context of development agreements held that the year of
taxability is the year in which the contract is executed. The Court held that in the
case of development agreement one cannot go by substantial performance of
the contract and the year of chargeability would the year of execution.
The decision of the Bombay High Court in the case of Chaturbhuj Dwarkadas
Kapadia was distinguished by the Bombay Tribunal in the case of ACIT Vs. Mrs.
Geetha Devi Pasari (104 TTJ 375)
The Pune Bench of the Tribunal in the case of Mahesh Nemichandra Vs. ITO
(2012) TIOL 408 has held that where the assessee forms a JV with a builder for
development of property and enters into an irrevocable agreement the date of
the Agreement would be the date of transfer .
The Mumbai Tribunal in the case of Hillside Construction Co. Vs. DCIT (2012)
TIOL 516 has held that where developments rights were parted the entire
amount became due on signing of the development agreement and handing over
of possession of the land. Postponement of payment does not stop accrual of
income.
K.Vaitheeswaran - All Copyrights Reserved
18. Chennai Tribunal in Mount Mettur Pharmaceutical (2008
TIOL 657) has held that when vacant possession of undivided
share of land Is handed over on 16.04.1996, the transfer took
place on 16.04.1996.
AAR in Jasbir Singh Sarkaria (294 ITR 196) has ruled that for
Section 2(47)(v) to apply there must be a transaction under
which the possession of immovable property is allowed to be
taken or allowed to be retained. What is contemplated is a
transaction which has a direct and immediate bearing on
allowing possession to be taken in part performance of the
contract of transfer. It is at that point of time the deemed
transfer takes place.
19. Hyderabad Bench of the Tribunal in the case of Akkineni
Nagarjuna Rao (2012) 52 SOT 23 has held that where a plot
of land was given for development to the developer under an
agreement with a promise by the developer to handover 35%
of the built up area, it is a case of transfer since possession of
the land had been handed over.
Chennai Bench of the Tribunal in the case of Vijaya
Productions (2012) 134 ITD 19 has held that when
possession is not taken and the power is only to enable
contractual obligations in planning and development there is
no transfer.
20. (i) If possession is handed over to the developer on the date of signing the
development agreement then in the light of the various decisions
referred to above and in the absence of an alternative view emerging in a
higher forum, transfer would take place on the date of execution of the
development agreement.
(ii) If possession of property as well as the right to deal with the property in
any manner is granted through a power of attorney at a later point of
time and the agreement refers to this aspect as a specific future
transaction to be consummated on the happening of an event, then the
year of taxability would be the year in which the said transaction takes
place.
(iii)Where transfer takes place by virtue of any of the trigger points, the land
owner can take recourse to Section 50D and adopt the fair market value
as the consideration for the purpose of calculating capital gains.
21. Date of possession
Conflict between developer and landowner
Postponement of date of possession from a
capital gain perspective may result in higher
service tax liability.
22. Section 65B(54) of the Finance Act, 1994 defines ‘works
contract’ as under:-
“ Works contract means a contract wherein transfer of
property in goods involved in the execution of such contract is
leviable to tax as sale of goods and such contract is for the
purpose of carrying out construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance,
renovation, alteration of any moveable or immovable property
or for carrying out any other similar activity or a part thereof in
relation to such property.”
K.Vaitheeswaran - All Copyrights Reserved
23. In the earlier regime only select works
contracts were covered under the service tax
levy.
In the new regime all works contracts are
taxable.
Repair and maintenance is also considered as
a works contract.
K.Vaitheeswaran - All Copyrights Reserved
24. Value of service portion = Gross amount charged for the
works contract Less the value of property in goods
transferred in the execution of the said works contract.
Gross amount shall not include VAT.
Value shall include labour, amount paid to sub-contractor for
labour and services, charges for planning, design, architect,
hire, cost of consumables, cost of establishment, similar
expenses and profit relatable to supply of labour and service.
Where VAT has been paid on the actual value of the
property in goods transferred in the course of execution of
WCT then such value adopted for VAT shall be taken as value
of property in goods for determination of value of services.
K.Vaitheeswaran - All Copyrights Reserved
25. CATEGORY VALUE
WCT for execution of original works 40% of the total amount charged
WCT for maintenance or repair or
reconditioning or restoration or
servicing of any goods.
70% of the total amount charged
Other WCTs not covered above
including maintenance, repair,
completion and finishing services
such as glazing, plastering, floor and
wall tile, installation of electrical
fittings of an immovable property.
60% of the total amount charged
Cenvat credit is not available on
inputs.
K.Vaitheeswaran - All Copyrights Reserved
26. When Section 65B(44) excludes specifically
transfers referred to in Article 366(29A), can Rule 2A
create a higher liability including the goods portion.
For certain contracts under the VAT Law, 85% is
accepted as goods portion and 15% is accepted as
labour portion. For the same contract, under the
Service Tax Law, labour portion is 40%.
For maintenance contracts, 70% is adopted as
service value under service tax law and VAT law
adopts 70% as material value.
K.Vaitheeswaran - All Copyrights Reserved
27. The Supreme Court in the case of Raheja
Development Corporation had observed that an
agreement entered into by a developer before the
construction is complete is a works contract.
This decision was doubted by the Supreme Court and
the matter was referred to the Larger Bench in the
case of Larsen & Toubro Ltd. Vs. State of
Karnataka.
The Larger Bench vide decision dated 26.09.2013 has
rendered a landmark decision which will have far
reaching implications for the real estate industry.
28. Raheja Development entered into development agreements
with landowners.
Raheja Development entered into agreements of sale with
intended purchasers.
The agreements provided that on completion of
construction the residential apartments or commercial
complexes would be handed over to the purchasers who
would get an undivided interest in the land also.
The owners of the land would then transfer the ownership
directly to the society formed under the Karnataka
Ownership Flat (Regulation of the Promotion of
Construction, Sale, Management and Transfer) Act, 1972
29. The definition of works contract included any
agreement for carrying out for cash, deferred
payment or other valuable consideration, the
building, construction, manufacture,
processing, fabrication, erection, installation,
fitting out, improvement, modification,
repair or commissioning of any movable or
immovable property.
30. Three conditions must be satisfied for the levy
namely
(a) There must be a works contract
(b) The goods should have been involved in the
execution of the works contract
(c) The property in those goods must be transferred
to a third party either as goods or in some other
form.
If the developer has received or entitled to
consideration all the three conditions are fully met.
31. In the performance of the contract for construction,
the goods are intended to be incorporated in the
structure even though they lost their identity as
goods.
Where a contract comprises of both works
contract and transfer of immovable property such
contract does not alter the status of being a works
contract.
A contract may involve both a contract of work and
labour and a contract for sale.
32. Even if the dominant intention is not to
transfer the property in goods and rather it
is rendering of service or the ultimate
transaction is transfer of immovable
property, it is open to the States to levy
sales tax on the materials used in such
contract if such contract otherwise has
elements of works contracts.
33. Taxing the sale of goods element in WCT is
permissible even after incorporation of goods
provided the tax is directed on the value of goods
and does not purport to tax the transfer of
immovable property. The value of goods which
can constitute the measure for levy of tax has to
be the value of goods at the time of incorporation
of the goods in the works even though the
property passes as between the developer and
the flat purchaser after incorporation of goods.
34. It is not correct to say that the work is undertaken
by the developer for himself and for the owner
and the construction is not carried on for and on
behalf of the purchaser.
If at the time of construction and until construction
is completed there is no contract for construction of
the building with the flat purchaser, the goods used
in construction cannot be deemed to have been sold
by the builder since at that time there is no
purchaser.
35. The expression ‘in any other form’ is of utmost significance.
Goods which have by incorporation become part of
immovable property are deemed as goods.
The ultimate transaction between the parties may be sale
of flat but it cannot be said that the characteristics of WCT
are not involved in that transaction. When the
transaction involves the activity of construction factors
such as, the flat purchaser has no control over the
materials to be used or he does not get a right to monitor
construction or has a say in design or layout are not of
significance.
36. It cannot be said to be an absolute proposition in
law that ownership of the goods must pass by way
of accretion or exertion to the owner of the
immovable property to which they are affixed or on
which the building is built.
37. In the light of this decision, the argument
that the developer is providing only a self
service becomes questionable.
If the construction agreement between the
developer and the purchaser is a works
contract, what will happen to the disputes for
the period prior to 01.07.2010.
Prior to 01.07.2010, Department has issued
show cause notices under ‘construction of
complex’ and not under ‘works contract’.
38. If agreement between developer and
purchaser is a WCT for VAT purposes based on
decision of L&T then it is also WCT for service
tax purposes.
Service tax at the rate of 12.36% on 40% of the
construction agreement?
Is there any difference between construction
of complex as a category and works contract
service since both categories are considered
as declared services in terms of Section 66E?
39. Assuming land value is Rs.50 lakhs and construction
consideration is Rs.1 crore, under construction of
complex service, service tax is payable at rate of
12.36% on 30% of Rs.1.5 crores that is Rs.5,56,200/-.
Under works contract service, service tax is payable
at the rate of 12.36% on 40% of Rs.1 crore that is
Rs.4,94,400/-.
Cenvat credit effect is neutral in both systems since
credit is available on capital goods and input
services and not available on inputs.
40. Composite contract for manufacture, supply
and installation of lifts in a building – whether
it is a contract for sale of goods or a works
contract.
41. A Five Member Bench of the Supreme Court in the case of
Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu
(2014) 34 STR 641 has held as under:-
Works contract is an indivisible contract but by legal fiction it
is divided into two parts, one for sale of goods and the other
for supply of labour and services.
The concept of dominant nature test for treating a contract
as a works contract is not applicable.
Works contract under Article 366(29A) takes within its sweep
all genre of works contract.
Once the characteristics of works contract are met in a
contract, any additional obligation in the contract would not
change the nature of the contract.
42. A lift is not a plant which is erected at site. Without
installation the lift cannot be mechanically functional.
Installation of lift in a building is a composite contract.
In L&T the Bench has held that the ultimate transaction
between the parties may be the sale of a flat but it cannot be
said that the characteristics of WCT are not involved in that
transaction.
If the contract is a composite contract falling within the
definition of WCT under Article 366(29A), the incidental part
as regards labour and service pales into total insignificance
for the purpose of determining the nature of the contract.
43. It is necessary to state that if there are two contracts namely
purchase of the components of the lift from the dealer, it
would be a contract for sale and similarly if separate contract
is entered into for installation that would be a contract for
labour and service. But a pregnant one, once there is a
composite contract for supply and installation it has to be
treated as a works contract for it is not a sale of goods /
chattel simpliciter.
44. The Mumbai Bench of the Tribunal in the case of ITO Vs. Mrs. Chetana H. Trivedi
(2012) TIOL526 has held that the right to construct building on the said plot of
land by consuming FSI and the right as a receiving plot owner to load TDR over
and above the normal FSI, are rights which accrue to the assessee by virtue of the
development control regulation for Greater Bombay. These are rights over
property, which are capital assets within the meaning of the definition of capital
assets under section 2(14). The consideration received by the assessee was for
transfer of rights over such asset and same would fall under Section 45.
The Mumbai Bench of the Tribunal in the case of ACIT vs. Ishverlal
Manmohandas Kanakia ITA No. 3053 & 2650/Mum/2010 has held that the
receipts on assignment of FSI including originating from the plot of
land and/or married to it and right to load consume and use FSI credit by way of
TDR which was the subject matter of transfer by the Assessee was a capital
asset in respect of which the cost of improvement could not be ascertained
and therefore the receipts of consideration for transfer of the said rights
cannot be brought to tax as the said receipts will be capital receipts and not
capital gain.
45. The Bombay High Court in the case of Chheda Housing Development
Corpn., a Partnership firm Vs. Bibijan Shaikh Farid & Ors. (2007) (3)
MHLJ 402 (Bom.) dealing with specific performance of Agreement for
use of TDR held that FSI/TDR are benefits arising from the land
consequently must be held as immovable property. The Court observed
that an immovable property under the General Clauses Act, 1897 under
section 3(26) has been defined as to include benefits arising out of land.
Therefore, if there is any benefit which arises out of the land, then it is
immovable property.
The Mumbai Bench of the Tribunal in the case of Jethalal D. Mehta Vs.
DCIT (2005) 2 SOT 422 (Mum.), following the judgment of Apex court in
CIT vs. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) held that TDR
granted by DCR, 1991 qualifying for equivalent F.S.I. having no cost
of acquisition, sale thereof gives no rise to capital gains.
46. The Mumbai Bench of the Tribunal in the case of ITO Vs. Lotia Court Co-
operative Housing Society Ltd. (2008) TIOL 404, held that the assignment of the
TDRs to the developer and in turn the additional floors to be constructed and also
repairs/renovation of the building to be carried out, does not result in to accrual
of any income in the hands of the assessee society, who is not the owner of the
plot. Even in the case of flat owners who owned the individual flats in the
respective names, there is no question of taxability of receipt on account of sale
of additional floor space index received by the assessee by virtue of transfer of
TDRs under the Development Control Regulation for Greater Mumbai, 1991.
Receipt on sale or assignment of rights to receive TDRs is held not liable to
tax.
The Mumbai Bench of the Tribunal in the case of New Shailaja CHS vs. ITO (ITA
NO 512/M/2007.BENCH B dated 2nd Dec., 2008 (Mumbai) wherein the assessee,
a Co-op. Housing Society became entitled, by virtue of the Development Control
Regulations, to Transferable Development Rights (TDR) and the same were sold
by it for a price to a builder, it was held that though the TDR was a ‘capital
asset’, as there was no ‘cost of acquisition’ for the same, the consideration
could not be taxed as capital gains.
47. Can TDR be considered as goods?
The Supreme Court in the case of Yasha Overseas Vs. Commissioner of
Sales Tax (2008) TIOL 97 SC-CT has held that DEPB like REP license
clearly goods within the meaning of sales tax laws and it sale exigible to
tax.
The Commissioner under Section 85 of the Delhi VAT Act has issued a
Ruling to the effect that Certified Emission Reductions (CER) commonly
known as ‘Carbon Credit’ are goods.
If TDR is considered as immovable property, there is no service tax.
If TDR is considered as goods there is no service tax but VAT / CST
applicability has to be addressed.
48. The Tribunal in the case of Nitesh Estates Limited Vs. Commissioner of
Central Excise (2012) 26 STR 587 has held that construction of
residential complex for their clients namely ITC Ltd who in turn allotted
the apartment to its employees for residential use prima facie is not
liable to service tax.
In terms of Section 65B(44) service means any activity carried out by a
person for another for consideration and includes a declared service. In
terms of Explanation 3, an unincorporated association or body of persons
as the case may be and a member thereof shall be treated as distinct
persons.
The principles of mutuality are yet to be tested in the new regime.
However if the society does not recover anything more than the amounts
paid to the contractors whether service tax is still payable by the society?
49. Stamp duty and registration
Service tax
VAT
VAT - TDS
TDS under Section 194-IA
50.
51. Services provided to the Government, a local authority or a
governmental authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of -
(a) a civil structure or any other original works meant predominantly
for use other than for commerce, industry, or any other business or
profession;
(b) a historical monument, archaeological site or remains of national
importance, archaeological excavation, or antiquity specified under the
Ancient Monuments and Archaeological Sites and Remains Act, 1958;
(c) a structure meant predominantly for use as
(i) an educational,
(ii) a clinical, or
(iii) an art or cultural establishment;
52. (d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for
(i) water supply
(ii) water treatment, or
(iii) sewerage treatment or disposal; or
(f) a residential complex predominantly meant for self-use or the use
of their employees or other persons specified in the Explanation 1 to
clause 44 of section 65 B of the said Act.
Original works means
(i) all new constructions;
(ii) all types of additions and alterations to abandoned or
damaged structures on land that are required to make them
workable;
(iii) erection, commissioning or installation of plant, machinery
or equipment or structures, whether pre-fabricated or otherwise;
53. Residential complex means any complex comprising of a building or
buildings, having more than one single residential unit.
“Governmental Authority means an authority or a board or any other body:
(a) set up by an Act of Parliament or a State Legislature; or
(b) established by Government;
with 90% or more participation by way of equity or control to carry out any
function entrusted to a municipality under Article 243W of the Constitution
54. Services provided by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration of,-
(a) a road, bridge, tunnel, or terminal for road transportation for use by
general public;
(b)a civil structure or any other original works pertaining to a scheme under
Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;
(c) a building owned by an entity registered under section 12 AA of the
Income tax Act, 1961 and meant predominantly for religious use by
general public;
(d) a pollution control or effluent treatment plant, except located as a
part of a factory; or
(e) a structure meant for funeral, burial or cremation of deceased;
55. Services by way of construction, erection, commissioning,
or installation of original works pertaining to,-
(a) an airport, port or railways, including monorail or metro;
(b) a single residential unit otherwise than as a part of a residential complex;
(c) low- cost houses up to a carpet area of 60 square metres per house in a
housing project approved by competent authority empowered under the
‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing
and Urban Poverty Alleviation, Government of India;
(d) post- harvest storage infrastructure for agricultural produce including a cold
storages for such purposes; or
(e) mechanised food grain handling system, machinery or equipment for
units processing agricultural produce as food stuff excluding alcoholic
beverages;
Single residential unit means a self-contained residential unit which is
designed for use, wholly or principally, for residential purposes for one
family.
Residential complex” means any complex comprising of a building or
buildings, having more than one single residential unit.
56.
57. Section 68(2) provides that in respect of such taxable
services as may be notified the Government may
specify that the tax shall be paid by such person in
such manner at the rate specified in Section 66B and
all the provisions of this Chapter shall apply to such
person as if he is a person liable for paying service
tax.
The proviso provides that the Government may
notify the service and the extent of service tax
payable by such person and the remaining part shall
be paid by the service provider.
58. Nature of
Service
Status of
Service Provider
Status of Service
Receiver
Percentage of Service Tax
Payable by
Service
Provider
Service
Receiver
Service
portion in
execution of
works
contract.
Individual / HUF /
Partnership Firm
whether registered or
not, including AOP
located in the taxable
territory to a business
entity registered as a
corporate located in the
taxable territory.
Business entity
registered as a body
corporate.
50% 50%*
*The service
recipient has the
option of
choosing the
valuation
method as per
choice
independent of
the valuation
method adopted
by the provider.
59. Works contract means a contract wherein transfer
of property in goods involved in the execution of
such contract is leviable to tax as sale of goods and
such contract is for the purpose of carrying out
construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance,
renovation, alteration of any moveable or
immovable property or for carrying out any other
similar activity or a part thereof in relation to such
property.
60. Activity
Material + Labour
Position in VAT
Section 194C
Past period
VAT TDS
61. It is to be noted that the tax liability for the service provider and the service
receiver respectively are independent. This is not like a TDS mechanism
and would require discharging of the identified percentage of service tax.
Assuming, the reverse charge mechanism is applicable in respect of works
contract service provided by a non-corporate body (individual or AOP or
HUF or Partnership firm) and the bill is for Rs.1 lakh, the Company can
calculate value as 40% and the service tax liability of the Company under
reverse charge mechanism would be 50% of 12.36% calculated on 40% of
the WCT value.
Assuming, reverse charge mechanism is applicable in respect of manpower
services or security services provided by a non-corporate body and the bill
is for Rs.1 lakh the service tax liability of the Company under reverse
charge mechanism would be 75% of 12.36% on Rs.1 lakh.
62. 10 Lakh exemption not available
Payment should be made only by cash and not through
cenvat
Amount paid can be taken as credit if otherwise eligible and
the challan is the cenvatable document
Payment by the provider in full may not insulate the receiver
from liability to the extent of the receiver’s portion of tax
63. If service tax due on transportation of a
consignment has been paid or is payable by a
person liable to pay service tax, service tax
should not be charged for the same amount
from any other person, to avoid double
taxation.
64. There is no dispute that service in question has suffered tax.
The only dispute is the person who shall pay the service tax.
When the treasury has not been affected by virtue of
collection of service tax from the service provider as is the
case of the Revenue and there is no legal infirmity in the
decision of the learned Commissioner (Appeals) there
cannot be double taxation of same service. But it is fact that
realization of the service tax has been made from the service
provider while the recipient of service of GTA has liability
under the law. Finding no loss of revenue, as has been held
by the learned Commissioner (Appeals), Revenue’s appeal is
dismissed.
65. The Mumbai Bench of the Tribunal has held
that once the amount of service tax is
accepted by the revenue from the provider of
GTA service it cannot be demanded again
from the recipient of the GTA service.
66. The definition of ‘service’ excludes transfer of title in
immovable property by way of sale, gift or in any other
manner.
Immovable property not defined.
Immovable property in terms of General Clauses Act includes
land, benefits to arise out of land, things attached to the
earth or permanently fastened to anything attached to the
earth.
Joint Development – Landowner / Developer perspective
Can the transaction be seen as barter of land for constructed
apartments?
Can the transaction be seen as a transfer of title in
immovable property from both sides?
67. Section 118 of the Transfer of Property Act provides that when two
persons mutually transfers the ownership of one thing for the ownership of
the other, neither thing or both things being money only, the transaction is
called ‘an exchange’.
The Supreme Court in the case of CIT Vs. Motor & General Stores Pvt.
Ltd. has held that a transaction in which the consideration for the transfer
of certain properties are shares in a limited company is an exchange.
The Supreme Court in the case of CIT Vs. Rasiklal Maneklal (1989) 177 ITR
198 has held that an exchange involves the transfer of property by one
person to another and reciprocally the transfer of property by that other to
the first person. There must be a mutual transfer of ownership of one
thing for the ownership of another.
Whether the flats to be exchanged exist at the time of the land being
handed over?
68. Relinquishment of rights in immovable property.
Whether it can be considered as merely transfer of title in
immovable property by way of sale, gift or in any other
manner.
Scope of Section 66E(e) dealing with agreeing to the
obligation to refrain from an act, or to tolerate an act or a
situation or to do an act.
69. Renting of immovable property
The Supreme Court in the case of Member Board of Agricultural Income Tax Vs.
Sindhurani Chaudhurani (1957) 32 ITR 169 has held that salami in the form of a
lump sum non-recurring payment made by a prospective payment to the landlord
as a consideration for the settlement of agricultural land, paid anterior to the
constitution of relationship of landlord and tenant is not ‘rent’.
The Mumbai Bench of the Income Tax Appellate Tribunal in the case of ITO Vs.
Shah Group Builders Ltd. (2013-TIOL-751) has held that lease premium paid to
CIDCO is not in the nature of rent contemplated under Section 194-I and the
assessee was not liable to deduct tax at source.
The Chennai Bench of the Tribunal, however has taken a contrary position in the
case of Foxconn and has held that Section 194-I is applicable. However, the
Chennai Bench has not considered the angle that the development charges is not
‘rent’ but the consideration for the transfer of right to use the land. The provisions
of Section 194-I would be attracted provided what is paid is in the nature of rent
and rent is defined to mean any payment for the use of any land or building, etc.
70. In the context of service tax when tax was imposed on renting of immovable
property through Section 65(105)(zzzz) of the Finance Act, 1994, the Tribunal at
the stage of Stay Petition in the case of Greater Noida Industrial Developmental
Authority Vs. CCE (2014) 33 STR 464 has observed that the ordinary meaning of
‘renting’ would not cover under long term leasing. The definition of renting to
include letting, licensing, leasing, would suggest that leasing would not cover
long term leasing where a property is given to a person with rights to transfer,
assign and mortgage the rights. Developing a township according to a plan
which would be conducive to society at large and maintaining municipal
functions in such township has to be considered as a sovereign function of a
Government and not a commercial activity of the Government.
71. K.VAITHEESWARAN
ADVOCATE &TAX CONSULTANT
Flat No.3, First Floor,
No.9, Thanikachalam Road,
T. Nagar,
Chennai - 600 017, India
Tel.: 044 + 2433 1029 / 4048
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Bangalore – 560 001, India
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