Applicability of Service tax on special services provided by Builders/ developers
1. With effect from 1-7-2012 all activities relating to construction fall within the purview
of following “Declared Services” under section 66E of finance act, 1994:
66E(b): Construction of a complex, building, civil structure or a 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.
66E(h): Service portion in the execution of a works contract.
2. Illustrative list of services in relation to construction activities would be taxable:
• Construction of boundary wall
• Construction of parking wall
• Services in respect of cutting of plots and development of colonies received by
builders
• Construction of residential complex and units ranging between 2-12 units (more
than one unit)
• Construction services provided to non-commercial organization in respect of
building which are used for other than religious purpose.
• Services provided in respect of construction of hospitals to any person other than
government or government authorities or local authorities
• Services provided in respect of construction of building to be used for the
purpose of education to any person other than government or governmental
authorities or local authorities
3. Other special services provided by builders / developers
Particulars Taxability
Share application money for
formation of society
Legal charges for Formation of
Society
Builder would be acting as pure agent in collecting
such charges. In such case, as per Rule 5(2) of
service tax (determination of value) Rules, 2006,
amount collected as pure agent shall be excluded
from value of taxable service.
Builder would be acting as pure agent in collecting
such charges. In such case, as per Rule 5(2) of
service tax (determination of value) Rules, 2006,
Security Deposit for
Maintenance
Water, Electric and Fire Cess If builder has collected amount exactly paid then it
Generator charges As per guidance note issued by CBEC on 20.6.2012,
amount collected as pure agent shall be excluded
from value of taxable service.
Such amount would be in nature of deposit. No
service tax would be liable.
would not be liable for service tax.
Charges collected by a developer for distribution of
electricity within a residential complex would liable for
service tax.
Pipe gas connection charges Taxable under head “service other than negative list”
Development charges As per explanation to section 66E(b), the expression
"construction" includes additions, alterations,
replacements or remodelling of any existing civil
structure. Hence, any type of development done and
charges collected for the same by builders would be
liable for service tax.
Environmental charges Taxable under head “service other than negative list”
Advance maintenance charges Taxable under Management, maintenance or repair
Gymnasium charges Taxable under health club service
Maintenance of club house &
swimming pool
Construction and maintenance
of road within the society
premises or an access road to
the building or society gate
service
Taxable under Management, maintenance or repair
service
As per Mega exemption notification 25/2012-ST
dated 20.6.2012, services provided by way of
construction, maintenance of roads for use by general
public would not be liable for service tax.
1. With effect from 1-7-2012 all activities relating to construction fall within the purview
of following “Declared Services” under section 66E of finance act, 1994:
66E(b): Construction of a complex, building, civil structure or a 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.
66E(h): Service portion in the execution of a works contract.
2. Illustrative list of services in relation to construction activities would be taxable:
• Construction of boundary wall
• Construction of parking wall
• Services in respect of cutting of plots and development of colonies received by
builders
• Construction of residential complex and units ranging between 2-12 units (more
than one unit)
• Construction services provided to non-commercial organization in respect of
building which are used for other than religious purpose.
• Services provided in respect of construction of hospitals to any person other than
government or government authorities or local authorities
• Services provided in respect of construction of building to be used for the
purpose of education to any person other than government or governmental
authorities or local authorities
3. Other special services provided by builders / developers
Particulars Taxability
Share application money for
formation of society
Legal charges for Formation of
Society
Builder would be acting as pure agent in collecting
such charges. In such case, as per Rule 5(2) of
service tax (determination of value) Rules, 2006,
amount collected as pure agent shall be excluded
from value of taxable service.
Builder would be acting as pure agent in collecting
such charges. In such case, as per Rule 5(2) of
service tax (determination of value) Rules, 2006,
Security Deposit for
Maintenance
Water, Electric and Fire Cess If builder has collected amount exactly paid then it
Generator charges As per guidance note issued by CBEC on 20.6.2012,
amount collected as pure agent shall be excluded
from value of taxable service.
Such amount would be in nature of deposit. No
service tax would be liable.
would not be liable for service tax.
Charges collected by a developer for distribution of
electricity within a residential complex would liable for
service tax.
Pipe gas connection charges Taxable under head “service other than negative list”
Development charges As per explanation to section 66E(b), the expression
"construction" includes additions, alterations,
replacements or remodelling of any existing civil
structure. Hence, any type of development done and
charges collected for the same by builders would be
liable for service tax.
Environmental charges Taxable under head “service other than negative list”
Advance maintenance charges Taxable under Management, maintenance or repair
Gymnasium charges Taxable under health club service
Maintenance of club house &
swimming pool
Construction and maintenance
of road within the society
premises or an access road to
the building or society gate
service
Taxable under Management, maintenance or repair
service
As per Mega exemption notification 25/2012-ST
dated 20.6.2012, services provided by way of
construction, maintenance of roads for use by general
public would not be liable for service tax.
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