Service Tax is Levied on Services provided by builders or Real Estate developers or any other person, where Building Complexes, or civil structure or part thereof are offered for sale but the payment is received before issuance of Completion certificate by a competent Authority.
Construction of complex, Buildings, Civil Structure or part thereof has been stated as Declared Service under Clause (44) of section 66 B which is definition of Services.
Computation of Service Tax on under Construction Property
At the time of sale of property, the amount paid by the purchaser to the builder is for,
1. Value of Land
2. Construction Services provided by the Builder/ developer
Service tax is levied on services and not on sale of goods/ immovable property & therefor in the above case service tax would only be levied on Construction Services Provided by Builder/Developers.
Abatement
Service tax on construction would be levied as per the rate in force on the total value of services provided by Builder/Developer provided, the purchase price of Land and the value of Construction services are shown separately in the Invoice.
In Case where it is Difficult to show the cost of Goods/Immovable Property and the cost of Services separately, there is abatement of 75% under Notification No. 26/2012-Service Tax dated 20/6/2012, and Service Tax would be levied only on 25% of total purchase price (Incl. of Price of land).
I.e. 25% of 12.36% = 3.09%
In budget 2013 abatement reduced from 75% to 70% for flats above 2000sq. feet. Or costing Rs. 1 crore and above.
| Particulars | Abatement Allowed | Taxable Component | Normal Rate of Service Tax | Effective Rate of Service Tax |
|---|---|---|---|---|
| Flat Size over 2000 Sq. Feet | 70% | 30% | 12.36% | 3.71% |
| Sale price over Rs. 1 Crore | 70% | 30% | 12.36% | 3.71% |
| Other Cases | 75% | 25% | 12.36% | 3.09% |
The ministry of Finance vide notification no. 9/2013 has reconfirmed that above abatement provided for the payment of Service Tax would be availed by the Builders only if :-
1. Cenvat Credit on inputs used for providing the services has not been availed.
2. Total amount charged includes the value of land and the value of land is shown separately in the invoice.
The service Tax so collected by the Builders/Real Estate Developers does not go in there pockets and is deposited with the Govt. by the person collecting the same before the due date of payment of Service Tax.
Due Dates for payment of Service tax
| Due Dates | |||
|---|---|---|---|
| Particulars | Frequency | Paid Physically | Paid online |
| Individual/Partnership | Quarterly | 5th of the following Quarter. | 6th of the following Quarter. |
| Others | Monthly | 5th of the following Month. | 6th of the following Month. |
Exception: Service Tax Collected for the Month/Quarter ending March shall be payable by 31st March of the Said Calendar year.
Late payment of Service tax
Simple Interest is levied on payment of service tax.
| Gross Turnover | Interest on Late Payment |
|---|---|
| More than Rs. 60 Lakhs | 18% |
| Less than Rs. 60 Lakhs | 15% |
Due Date for Return of Service Tax
E Filing of Service tax return has been made mandatory for all assesse from 1st Oct 2011.
Period Service Tax Return Due dates April to Sep 25th Oct Oct to March 25th April
Late Fees for Delay in filing Service Tax Return
| Delay after Due Date | Late Fees |
|---|---|
| First 15 Days | Rs. 500 |
| 15-30 Days | Rs. 1000 |
| More Than 30 Days | Rs. 1000 + Rs. 100 Per day beyond 30 days |
| The Maximum Late fees Payable is Rs. 20000/- |