• Service tax on apartments

I'm the  owner of 600yards land.in 2013 i had given agreement to builder/developer for construction.now building ready to occupy.total 10 flats of apartment.developer share and owner share 50-50.now developer asking 15% service tax on owner flats.who is the responsible to pay the service tax.if land owner not pay the service tax in future any problems may effect ?please clarify.

Asked 2 years ago in Service Tax from Hyderabad, Telangana
Hello Manoj,

We need to see what kind of an agreement you entered into with the Developer. Whether the consideration of your land contribution was in terms of 50 % of Developed Flats?, as per service tax law (after negative list ) any amount received towards development rights trasferred by the owners of land to the developer for developing flats/commercial will be taxable at rates applicable in force at the time of tranfer of those develoment rights 
Still service tax dept is not aggresive on development rights tranfer transactions as there has been ambiguity about the same , but after negative list in service tax law inserted that is solved it is advisable for land owners transferring to pay developer rights service tax

And Builder/developer is in position of a contractor as per service tax law so he has to pay 15% service tax on all flats build/developed till occupancy certificate is received after occupancy certificate is received no service tax liabiity on buider developer.

So if you are getting consideration in form of flats for the rights tranferred by you as land owners , resposiblity is on builder to collect service tax from you and deposit the same to the service tax department rate will be 15% less abatement @70% effective rate is 15%*30 =4.5%
thanks & regards
for any further clarifications you may write to us or call us

Ria Nagpal

Manish Nagpal & Co
Chartered Accountants

Ria Nagpal
CA, Ahmedabad
46 Answers
3 Consultations

5.0 on 5.0

Builder is liable to collect and pay service tax. However service tax is payable on the construction cost excluding land cost.
Abhishek Dugar
CA, Mumbai
2936 Answers
123 Consultations

5.0 on 5.0

Hello Sir,

Cannot upon your case unless we get to see the agreement between the builder and the Land Owner.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Rohit R Sharma
Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

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