Service Tax Circular on Residential Construction has retrospective effect

NEW DELHI. Vide a significant ruling dated 7th April 2008 reported by allindiantaxes site vide AIT-2008-121-CESTAT Customs Excise and Service Tax Appellate Tribunal has ruled that consolidated Service Tax Circular No.96/7/2007-ST dated 23.8.2007 related to residential construction service is by way of clarification of the law, and it will apply retrospectively.

Service Tax Circular No. 96/7/2007-ST dated 23.8.2007 has clarified  vide clause No. 079.01(b) as follows.

“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 relationships 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”.

The appellant was engaged in construction of complex; that they are not engaging any contractor or service provider in relation to construction of the complex and  that the entire work has been carried out by the appellant as developer and builder and the ready built flats are being sold.

                The original authority, on the basis of a circular dated 16.2.2006 issued  by DGST held that on any such construction of complexes service tax is attracted and accordingly confirmed the demand of duty.

                In a related development; Authority for Advance Rulings vide a ruling pronounced on 7th April 2008 has ruled that a Real Estate Developer who is booking, constructing and selling residential units on land owned by him is liable to service tax.

(Source: Allindiantaxes)


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