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Service tax Issues in Development and Redevelopment Group discussion led by: Ca. Jayesh M. Gogri Chaired by: Adv. Badri Narayan At Bombay Chartered Accountants’ Society On 29 th December, 2015

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Page 1: Service tax Issues in Development and Redevelopment · 12/29/2015  · levying service tax only on works contracts, and measure of tax with service element derived from gross amount

Service tax Issues in Development and Redevelopment

Group discussion led by: Ca. Jayesh M. Gogri

Chaired by: Adv. Badri Narayan

At Bombay Chartered Accountants’ Society

On 29th December, 2015

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Profession and Philanthropy…

“…. Is it not true that the professional and philanthropy vibe with each other?

I believe spirit of both is same-get and have no guilt in getting, gather knowledge, gather money, be wealthy in money and knowledge and then part, give, and distribute and disseminate knowledge and money-both ethical wealth.”

April 2011

Thought mailers

BCAJ

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Late Shree Narayan Varma

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REDEVELOPMENT OF PROPERTIES

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Facts • Society engaging a builder to redevelop the society premises • Each member to get a newly constructed flat with an

additional area • Apart from the flat, members to get certain one time

allowances like: shifting allowance, brokerage allowance and also recurring allowances like: rental

• Some members may buy additional area by paying proportionate price for the same

• Society to get one time corpus fund • Remaining FSI constructed and sold to third party buyers by

the builder

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IMPLICATIONS ON BUILDER

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APPLICABILITY OF SERVICE TAX

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Questions

Is service tax applicable?

If yes, under which category?

Construction category or works contract category?

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Finance Act, 1994 • 65B (44) "service" means any activity carried out by a person for

another for consideration, and includes a declared service, but shall not include—

(a) an activity which constitutes merely,— (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner

Two limbs: – means any activity carried out by a person for another for consideration – includes a declared service Is it an activity carried out by a person for another?

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Declared Services

Can it be said to be a declared 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 (h) service portion in the execution of a works contract

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Interpretation of statutes

• 1993 (66) E.L.T. 37(S.C.) Oswal Agro Mills Ltd. • 2010 (262) E.L.T. 50 (S.C.) Balwant Singh V. Jagdish Singh • provisions of statue including every word should be given full

effect keeping legislative effect in mind to ensure to achieve projected object

• No provision is treatable as enacted purposelessly • Courts cannot give interpretation to provision to render them

ineffective or otiose

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Declared service specifically provides for

Construction Works contract

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Section 66E

Which clause of 66E? 66 E (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 (h) service portion in the execution of a works contract

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Construction services

• 66 E (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

• Is it intended for sale to a buyer?

• Is the inclusive limb expansive or restrictive?

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Expansive

• Section 13 of General Clauses Act, 1897 13. Gender and number - In all (Central Acts) and Regulations, unless there is anything repugnant in the subject or context - Words importing the masculine gender shall be taken to include females, and words in the singular shall include the plural, and vice versa.

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Restrictive

Ponds India Ltd. Vs. Commissioner of Trade Tax, Lucknow [2008-(ST1)-GJX-0027-SC] • The word "includes" has different meanings in different

contexts. • Generally when the word "include" is used in a definition

clause, it is used as a word of enlargement, that is to make the definition extensive and not restrictive.

• But the word "includes" is also used to connote a specific meaning, that is, as "means and includes" or "comprises" or "consists of "

• Principles of interpretation- Justice G.P. Singh: The word ‘include’ may in certain contexts be a word of limitation

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Category-works contract?

(h) service portion in the execution of a works contract (54) "works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any moveable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;

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MVAT

MVAT definitions: • (24) "sale" means a sale of goods made within the State for cash or

deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge; and the words "sell", "buy" and "purchase", with all their grammatical variations and cognate expressions, shall be construed accordingly.

• (25) "sale price" means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged.

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VAT applicable on such transaction?

Devi Das Gopal Krishnan - 20 STC 430 • barters not covered

Dhampur Sugar Mills – Mollasses v. lease- 147 STC 5 • barters may be covered

if prices determined

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FAQ by Maharashtra Department

• 28.08.2012 FAQ published by MVAT Department • 25. If builder constructs the flat on the land which is owned by landowner

and out of the constructed flats some flats are given to landowner and other flats are sold by builder to prospective buyer. Land owner sales the flat afterwards to buyers. In such instance what will be the point of taxation? Whether land owner is liable to pay the VAT on sales of flats which were handed over to him by builder?

Ans: Builder is liable to pay tax only in respect of sale of flats to prospective buyers. The flats which are given to land owners will not be taxable. The land owner when subsequently sales the flat will not liable to pay any tax as he is not a dealer.

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Education Guide

• 6.2.2 What would be the service tax liability in the following model - land is owned by a society, comprising members of the society with each member entitled to his share by way of an apartment. Society/individual flat owners give ‘No Objection Certificate’ (NOC) or permission to the builder/developer, for re-construction. The builder/developer makes new flats with same or different carpet area for original owners of flats and additionally may also be involved in one or more of the following: (i) construct some additional flats for sale to others; (ii) arrange for rental accommodation or rent payments for society members/original owners for stay during the period of re-construction; (iii) pay an additional amount to the original owners of flats in the society.

• Under this model, the builder/developer receives consideration for the construction service provided by him, from two categories of service receivers. First category is the society/members of the society, who transfer development rights over the land (including the permission for additional number of flats), to the builder/developer. The second category of service receivers consist of buyers of flats other than the society/members. Generally, they pay by cash.

• Re-construction undertaken by a building society by directly engaging a builder/developer will be chargeable to service tax as works contract service for all the flats built now.

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Letter issued to MCHI by Commissioner

• F. No. V/ST- I/Tech- II/463/11 dated 31st August, 2012 Clarification on issue of Service Tax on redevelopment of

society post 1st July, 2012 – Under section 66E, construction service notified as declared service – Exclusion clause of “intended for personal use of residence” not

available in the present definition – Construction made for existing flat owners for which no consideration

or part consideration is paid to the Developer will be liable to Service tax

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Construction service

• (zzzh) to any person, by any other person, in relation to construction of complex;

• Explanation. — For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorised by the builder before the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer;

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Works contract service

(zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation. — For the purposes of this sub-clause, “works contract” means a contract wherein, — (i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) such contract is for the purposes of carrying out, — (a) …….; or (b)construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) construction of a new residential complex or a part thereof; or

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Landmark decision of L & T-2015…

• COMMISSIONER OF C. EX. & CUS., KERALA V. LARSEN & TOUBRO LTD. 2015 (39) S.T.R. 913 (S.C.)-judgment delivered in August 2015

• Works contract - It is distinct from contracts for services simpliciter

recognized commercially and legally - Hence, it has to be taxed separately. [para 17]

• Finance Act, 1994 - Section 65(105) - It refers only to service contracts simpliciter and not to composite works contracts - It defines “taxable service” as “any service provided”, and all its sub-clauses refer to service contracts simpliciter without any other element in them - Also, under Section 67 ibid, value of taxable service is gross amount charged by service provider, without deduction of value of property in goods transferred in execution of works contract. [para 24]

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... Landmark decision of L & T-2015

• Works contract - Indivisible works contracts - Liability to Service Tax - Prior to 1st June, 2007, where after Finance Act, 2007 expressly made such contracts liable to Service Tax - Section 65(105) of Finance Act, 1994 had levied Service Tax only on contracts simpliciter and not composite indivisible works contracts - There was no charging section specifically levying service tax only on works contracts, and measure of tax with service element derived from gross amount charged for works contract less value of property in goods transferred in execution of works contract - G.D. Builders case [2013 (32) S.T.R. 673 (Del.)], overruled

• Zzzza v/s zzzh

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Summary of discussion on Applicability

Applicability

Activity Declared service

Construction Works contract

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Agreement pre 1.7.2012

Charge- Section 66B • There shall be levied a tax (hereinafter referred to as the service tax) at the

rate of [fourteen per cent.] on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.

Point of taxation : • Earlier of

– Date of invoice (if raised in time) • Date of completion of service

– Date of payment received – Event triggering payment by SR- Continuous supply

• Exemption u/Noti no. 36/2010 dated 28.6.2010 ‘advance payment’ received

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TAXABLE VALUE

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Question

Determination of Value on which

service tax is payable

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Valuation

Circular No. 151/2/2012-S.T., dated 10-2-2012

B) Valuation : • (i) Value, in the case of flats given to first category of service receiver,

is determinable in terms of section 67(1)(iii) read with rule 3(a) of Service Tax (Determination of Value) Rules, 2006, as the consideration for these flats i.e., value of land/development rights in the land may not be ascertainable ordinarily. Accordingly, the value of these flats would be equal to the value of similar flats charged by the builder/developer from the second category of service receivers. In case the prices of flats/houses undergo a change over the period of sale (from the first sale of flat/house in the residential complex to the last sale of the flat/house), the value of similar flats as are sold nearer to the date on which land is being made available for construction should be used for arriving at the value for the purpose of tax. Service tax is liable to be paid by the builder/developer on the ‘construction service’ involved in the flats to be given to the land owner, at the time when the possession or right in the property of the said flats are transferred to the land owner by entering into a conveyance deed or similar instrument (eg. allotment letter).

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Valuation Rules

• RULE 3. Manner of determination of value. — Subject to the provisions of section 67, the value of taxable service, where such value is not ascertainable, shall be determined by the service provider in the following manner :-

• (a) the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;

• (b) where the value cannot be determined in accordance with clause (a), the service provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.

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CBEC Education guide

• 6.2.1 What would be the liability to pay service tax on flats/houses agreed to be given by builder/developer to the land owner towards the land/development rights and to other buyers. If payable, how would the services be valued? Here two important transactions are identifiable: (a) sale of land by the landowner which is not a taxable service; and (b) construction service provided by the builder/developer. The builder/developer receives consideration for the construction service provided by him, from two categories of service receivers: (a) from landowner: in the form of land/development rights; and (b) from other buyers: normally in cash.

• Value, in the case of flats given to first category of service receiver will be the value of the land when the same is transferred and the point of taxation will also be determined accordingly.

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Supremacy

CBEC Circular Education

guide

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Valuation

2013 (30) S.T.R. 33 (Tri. - Chennai) LCS CITY MAKERS PVT.

LTD. v/s CST, Chennai

Market value of flats sold to other buyers

2014 (34) S.T.R. 230 (Tri. - Chennai)

VISHRANTI HOMES (P) LTD. V. C.C. E.

Chennai-IV-

stamp duty value not

acceptable

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POINT OF TAXATION

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Determination of Point of Taxation

(Presuming activity is taxable) • Under Transfer of Property Act, 1882:

Section 53A • a contract for consideration in writing • signed by the transferor • transferee should have taken the possession of the property • transferee should be ready and willing to perform his part of contract Under Income tax Act, 1961

• Limited Power of Attorney v. Development agreement If Development Agreement enables passing of control of property then the date of agreement constitutes the date of transfer

– Chaturbhuj Dwarkadas Kapaidia vs. CIT (2003) 260 ITR 491 (Bom.)

• On possession – Potla Nageshwara Rao v. DCIT (2014) 365 ITR 249 (AP) (HC)

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Determination of Point of Taxation

• Mere execution of a development agreement is not a “transfer” if possession as per s. 53A of the Transfer of Property Act is not given – CIT v. Sadia Shaikh (Bom.)(HC), www.itatonline.org

• Mere execution of a development agreement does not result in a "transfer“ if the approval of the municipal corporation is delayed and the developer has not started work- Complete control over the property was not given and only license was given. – Dilip Annand Vazirani vs. ITO (2015) 167 TTJ 194 (Mum.)(Trib.)

• Neither possession was given nor consideration was received except some

advance – no construction activity started – No Transfer – CIT vs. Delhi Apartments Pvt Ltd. (2013) 352 ITR 322 (Del.)

• Income liable to tax is real not hypothetical – C.S. Atwal (P & H)

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CENVAT CREDIT

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Question

• Whether developer paying service tax to contractors and other service providers on receipt of input services & duty on capital goods while reconstructing the building can avail & utilize such input service tax/duty for discharging the liability on free sale area (otherwise such credit will be lost resulting into huge cost burden on developer)?

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Two situations

Whether allotting rehab

flats to members

amounts to service?

In case, no ST discharged on

construction of rehab flats by

builder then its CENVAT credit

be eligible?

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CENVAT Credit

• “output service” means any service provided by a provider of service located in the taxable territory but shall not include a service : (1) specified in section 66D of the Finance Act (2) where the whole of service tax is liable to be paid by recipient of service

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CENVAT Credit

• 2(l) “input service” means : any service used by a provider of output service for providing an output service But, it excludes: A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for –

(a) construction or execution of works contract of a building or a civil structure or a part thereof or (b) laying of foundation or making of structures for support of capital goods except for the provision of one or more of the specified services

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• Rule 6(1)

The CENVAT credit shall not be allowed on …. input service used

…..for provision of exempted services….

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• (e) “exempted service” means a - • (1) taxable service which is exempt from the whole of the

service tax leviable thereon; or • (2) service, on which no service tax is leviable under section

66B of the Finance Act; or • (3) taxable service whose part of value is exempted on the

condition that no credit of inputs and input services, used for providing such taxable service, shall be taken;

• but shall not include a service which is exported in terms of rule 6A of the Service Tax Rules, 1994.]

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• 44) “service” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—

(a) an activity which constitutes merely,— (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

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ADDITIONAL AREA

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Question

• whether additional area purchased by a member will entail service tax liability? If yes, determine nature of service, valuation & timing of payment

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Additional area sales to member

Applicability

Valuation

Timing

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SALE OF INCOMPLETE PROJECT

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Question

• What if the builder is unable to complete the whole project

and sells the same to another builder at an incomplete stage?

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Sale of Project

• Is it practicable?

• Tax implications to outgoing builder : a) VAT & ST applicable on sale of project?

LARSEN & TOUBRO LTD. 2014 (303) E.L.T. 3 (S.C.)The value of the goods which can constitute the measure of the levy of the tax has to be the value of the goods at the time of incorporation of goods in the works …(Para 124)

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Sale of Project

b) Reversal of input tax credit

• 2(l) “input service” means : any service used by a provider of output service for providing an output service

• Section 2 (e) : “exempted service” means (1) taxable service which is exempt from the whole of the service tax leviable thereon (2) service, on which no service tax is leviable under section 66B of the Finance Act (3) taxable service whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken; but shall not include a service which is exported in terms of rule 6A of the Service Tax Rules, 1994.

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Service

(44) “service” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include— (a) an activity which constitutes merely,— (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner;….

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Sale of Project

c) Adjustment of excess ST • Rule 6 (3) of STR, 1994

(3) Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in the contract, the assessee may take credit of such excess service tax paid by him, if the assessee, (a) has refunded the payment or part thereof, so received for the

service provided to the person from whom it was received; or (b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued

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Sale of Project

d) Refund of unutilized CENVAT Credit • Refund in cash allowed if, assessee goes out of

Modvat scheme • Slovak India Trading co. Pvt Ltd. – 2008 (223) ELT A170

(SC)

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Transfer of CENVAT Credit?

e) Transfer of Cenvat credit permitted?

• Rule 10 of CCR (2) If a provider of output service shifts or transfers his business on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the business to a joint venture with the specific provision for transfer of liabilities of such business, then, the provider of output service shall be allowed to transfer the CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated business.

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IMPLICATIONS ON SOCIETY

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DEVELOPMENT RIGHTS

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Question

Whether development right granted to developer is a

"service" in the law?

If yes, how the value to be determined & the timing of payment of

tax?

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LDRs

• 65B(44) “service” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—

(a) an activity which constitutes merely,— (i) a transfer of title in goods or immovable property, by

way of sale, gift or in any other manner; or

• Are LDRs Immovable Property?

• Immovable Property-not defined

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Education Guide

• 2.6 Activity to be taxable should not constitute only a transfer in title of goods or immovable property by way of sale, gift or in any other manner – Mere transfer of title in goods or immovable property by way of sale,

gift or in any other manner for a consideration does not constitute service.

– Goods has been defined in section 65B of the Act as every kind of moveable property other than actionable claims and money; and includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under contract of sale

– Immovable property has not been defined in the Act. Therefore the definition of immovable property in the General Clauses Act, 1897 will be applicable which defines immovable property to include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.

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TDR/FSI Sale

• Whether LDRs are immovable Property? – Section 3(26) of General Clauses Act, 1897

"immovable property" shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth

– COI-Entry 18, List 2 Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization

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TDR/FSI Sale

• Whether LDRs are immovable Property? – Section 3 (r) of Maharashtra Apartment Ownership Act, 1970

"property" means the land, the building, all improvements and structures thereon, and all easements, rights and appurtenances belonging thereto, and all article of personal property intended for use in connection therewith, which have been, or are intended to be, submitted to the provisions of this Act

– Section 2 (6) of Indian Registration Act, 1908 "immovable property" includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass;

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LDRs

• Sikandar and Ors. v. Bahadur and Ors. XXVII Indian Law Reporter, 462 (DB-Allahabad HC)- right to collect market dues upon a given piece of land is a benefit arising out of land within the meaning of Section 3 of the Indian Registration Act, 1877.

• Ram Jiawan and Anr. v. Hanuman Prasad and Ors. AIR 1940 Oudh 409- also held, that bazar dues, constitute a benefit arising out of the land and therefore a lease of bazar dues is a lease of immovable property.

• Chheda Housing Development Corporation v. Bibijaan Shaikh

Farid and Ors. 2007 (3) MhLj 402

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LDRs

• Can grant of LDR may fall under 66E clause (a) renting?

• “renting" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property;

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LDRs

• Section 105 of Transfer of Property Act, 1882 defines lease as “A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms”

• A license is defined in Section 52 of Indian Easements Act 1882 as ‘a right to do or continue to do, in or upon the immovable property of the grantor, something which would in the absence of such right be unlawful, such right does not amount to an easement or an interest in the property

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Lease v LDR

• right to enjoy property for certain time-lease

• Permission to use land without the right to exclusive possession -license

• LDR involves permanent and irrevocable transfer of land which cannot be regarded as lease or license

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CORPUS FUND

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Question

• Receipt of any monetary compensation like corpus fund shall be regarded as towards provision of any service to developer and liable to service tax?

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Corpus Fund

• Is it for rendition of any service?

• Can it be considered to be a declared service of the following

nature? – 66E (e) agreeing to the obligation to refrain from an act, or to

tolerate an act or a situation, or to do an act? – What is agreeing to the obligation?

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IMPLICATIONS ON MEMBERS

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Monetary compensation to members

• Whether receipt of any monetary compensation like hardship allowance, rent & shifting allowance shall be regarded as towards provision of any service to developer and liable to service tax?

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RESALE OF FLAT

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Question

• Taxability on sale by the member/tenant before completion to a third party buyer

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Education guide

• 6.2.8 If the person who has entered into a contract with the builder for a flat for which payments are to be made in 12 installments depending on the stage of construction and the person transfers his interest in the flat to a buyer after paying 7 installments, would such transfer be an activity chargeable to service tax?

• Such transfer does not fall in this declared service entry as the said person is not providing any construction service. In any case transfer of such an interest would be transfer of a benefit to arise out of land

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TENANTS

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Question

• Taxability in the hands of tenants • Who get new flats by consenting in grant of development

right (with or without extra area) in newly constructed (redeveloped) building (particularly keeping in view cl.(e) of S. 66E.

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Taxability in the hands of tenants

• Is it a taxable service? – 66E(e) agreeing to the obligation to refrain from an act, or to

tolerate an act or a situation, or to do an act

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TAXABILITY POST COMPLETION

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Question

• Taxability on sale post completion certificate by Architect but before getting occupation/ completion certificate

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Sale of units after completion but before certificate

• What is a Completion Certificate?

– Occupation Certificate?

– Building Completion Certificate?

• Section 353A – Brihan Mumbai Municipal Corporation Act,

1888

• Section 263 – Maharshtra Municipal Corporation Act, 1949

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Section 353A of BMC Act, 1888

Completion certificates, permission to occupy or use..

(1) Every person who employs a licensed surveyor or person approved by the Commissioner to erect a building or execute any such work as is described in section 342 shall, within one month after the completion of the erection of such or sent to the execution of such work, deliver or send or cause to be delivered building or to Commissioner at his office, notice in writing of such completion, accompanied by a certificate in the form of Schedule T signed by the person employed under section 344A, who is hereby required immediately upon completion of the work and upon demand by the person employing him to sign und give such certificate to such person, and shall give to the Commissioner all necessary facilities for the inspection of such building or of such work :

Provided that— (a) such inspection shall be commenced within seven days from the date of receipt of the notice of completion, and (b) the Commissioner may, within seven days from the date of commencement of such inspection, by written intimation addressed to the person from whom the notice of completion was received, and delivered at his address as stated in such notice, or, in the absence of such address, affixed to a conspicuous' part of the building to which such notice relates— (i) give permission for the occupation of such building or for the use of the building or part thereof affected by such work, or (ii) refuse such permission in case such building has been erected or such work executed so as lo contravene any provision of this Act or of the bye-laws.

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Section 353A of BMC Act, 1888

Completion certificates, permission to occupy or use.. (2) No person shall occupy or permit to be occupied any such building, or use or permit to be used the building or part thereof affected by any such work, until— (a) the permission referred to in proviso (b) to sub-section (1) has been received, or (b) the Commissioner has failed for twenty-one days after receipt of the notice of completion to intimate as aforesaid his refusal of the said permission.

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Section 263 of Maharashtra Municipal Corporation Act, 1949

263. (1) Every person shall, within one month after the completion of the erection of a building or the execution of any such work as is described in section 254, deliver or send or cause to be delivered or sent to the Commissioner at his office, notice in writing of such completion, accompanied by a certificate in the form prescribed in the bye-laws signed and subscribed in the manner so prescribed, and shall give to the Commissioner all necessary facilities for the inspection of such building or of such work and shall apply for permission to occupy the building. (2) No person shall occupy or permit to be occupied any such building, or use or permit to be used the building or part thereof affected by any work, until— (a) permission has been received from the Commissioner in this behalf, or (b) the Commissioner has failed for twenty-one days after receipt of the notice of completion to intimate his refusal of the said permission.

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Sale of units after completion but before certificate

– The Times of India (Hemali Chhapia – 8th November, 2013)

• Mumbai: Data accessed through the RTI query revealed that from 2003-04 to 2012-13, 14,370 proposals were received. Of these, 9,841 got an IOD (intimation of disapproval), another 13,313 were granted a CC (commencement certificate), 6,888 received an OC and 128 were issued a BCC (building completion certificate)

– Deeming fiction

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Press Release

• Press Information Bureau Government of India Ministry of Finance 26-October-2015 15:45 IST

• Mere transfer of title in immovable property is exempted from Service Tax

• In order to resolve a long standing issue relating to levy of Service Tax on sale of flats/dwellings etc. after issue of occupancy certificate but before issue of completion certificate in areas under the jurisdiction of Municipal Corporation of Greater Mumbai i.e. Brihanmumbai Municipal Corporation (BMC), it has been conveyed to the Service Tax Authorities in Mumbai on Friday, 23rd October, 2015 that sale of flats/dwellings etc., where the entire consideration is received after issue of occupancy certificate by BMC, leading to a mere transfer of title in immovable property, falls outside the definition of “Service” provided in Section 65B (44) of the Finance Act, 1994, and is therefore, not

taxable.

**********

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CA Jayesh Gogri 88

2/19 Nityanand Nagar, Sahar Road, Andheri (East), Mumbai-400 069.

+91 22 2683 6519 +91 98210 12151

[email protected] [email protected]

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