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It is a big victory for Promoters and Builders Association of Pune and Lakhs of property purchasers in the country. On 23rd August, Service Tax Authority in its circular No.96/7/2007-ST dated 23/8/07 clarified that there will be no Service Tax applicable on builders or developers.
In its para 079.01/.23.08.07 The circular said “in a case where the builder, promoter, developer or any such person builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of the said residential complex, the contractor in his capacity as a taxable service provider (to the builder / promoter / developer / any such person) shall be liable to pay service tax on the gross amount charged for the construction services under ‘construction of complex’ service [section 65(105)(zzzh)].”
The circular further said that “ If no other person is engaged for construction work and the builder / promoter / developer / any such person undertakes construction work on his own without engaging the services of any other person, then in such cases,-
(i) service provider and service recipient relationship does not exist,
(ii) services provided are in the nature of self-supply of services. Hence, in the absence of service provider and service recipient relationship and the services provided are in the nature of self-supply of services, the question of providing taxable service to any person by any other person does not arise.
It was objected by the builder's association PBAP of Pune to the Ministry of Finance and other authorities that it is a double taxation and flat purchasers are paying 10 to 12 % more on sale price. After a long fight , the association must be complimented for this great victory. Leaders like Kumar Gera, Lalit Kumar Jain, Atul Goel and others have given the industry its due.
The Circular :
Circular No.96/7/2007-ST
New Delhi, the 23rd August, 2007
F.No.354/28/2007-TRU
Government of India
Ministry of Finance
Department of Revenue
Tax Research Unit
Sub: Clarification on technical issues relating to taxation of services under the Finance Act, 1994 – Regarding.
079.01 / 23.08.07
Whether service tax is liable under construction of complex service [section 65(105)(zzzh)] on builder, promoter, developer or any such person,-
(a) who gets the complex built by engaging the services of a separate contractor, and
(b) who builds the residential complex on his own by employing direct labour?
(a) In a case where the builder, promoter, developer or any such person builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of the said residential complex, the contractor in his capacity as a taxable service provider (to the builder / promoter / developer / any such person) shall be liable to pay service tax on the gross amount charged for the construction services under ‘construction of complex’ service [section 65(105)(zzzh)].
(b) If no other person is engaged for construction work and the builder / promoter / developer / any such person undertakes construction work on his own without engaging the services of any other person, then in such cases,-
(i) service provider and service recipient relationship does not exist,
(ii) services provided are in the nature of self-supply of services.
Hence, in the absence of service provider and service recipient relationship and the services provided are in the nature of self-supply of services, the question of providing taxable service to any person by any other person does not arise.
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