1 Construction Service
¨ Construction Service is ‘declared service’ – section 66E(b)
¨ Closely linked with works contract service and that service should be studied first
2 Construction Service [section 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.
¨ “Construction” includes additions, alterations, replacements or re-modelling of any existing civil structure – – Explanation (II) to section 66E(b) of Finance Act, 1994 w.e.f. 1-7-2012 (Thus, repairs of existing buildings is not covered under this head. It will be taxable as general taxable service).
¨ Deemed construction service – Taxable if even part consideration received before completion of construction (completion certificate)
¨ Redevelopment of existing building taxable
3 Residential Complex
¨ “Residential complex” means 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
4 Single residential unit which is Part of Residential Complex is taxable
¨ Construction of single residential unit also taxable if it is part of residential complex
¨ If individual plots are allotted in a complex and then if individual plot owner gets his unit separately constructed in that complex, it will be subject to service tax.
5 Construction for Government, Governmental Authority or local authority
¨ Construction Services provided to Government, Governmental Authority or local authority for erection, construction, maintenance, repairs of non-commercial or non-industrial use, educational purpose, sewage, residential colony etc. not taxable.
¨ Governmental Authority means at least 90% participation should be of Government and set up as Board or Authority under Act
6 Exempt construction services
¨ Public Bridge, road, tunnel, terminals for road transport – construction as well as repairs
¨ Construction services to Charitable organisations for religious purposes only
¨ Construction of pollution control, effluent treatment – however, these will be taxable if part of factory
¨ Construction for Funeral, burial or cremation of deceased (dead saved)
¨ Ports, airport railways – only erection and construction (not repairs)
¨ Low cost housing under approved scheme
¨ Agriculture related construction – storage, food grain handling.
7 BOT Projects
¨ Risk taking is of Concessionaire
¨ Taxability depends on BOT model
¨ If amount paid to Government – taxable
¨ If construction by self for own use by the Concessionaire – not taxable
¨ Toll is not provision of service, but if contractor appointed for collection of toll, his services will be taxable.
8 Valuation of construction service
¨ If new construction and Vat leviable, then ‘works contract’ – then either on basis of value of service or composition scheme 40% for original works and 60% for finishing (as discussed under works contract service).
¨ 25% scheme if price includes land value – this is included in abatement scheme though really it is a composition scheme.
¨ The 33% scheme has gone w.e.f. 1-7-2012. Hence, advisable to issue Running Bill (Invoice) for work done upto 30-6-2012.