Change in abatement of construction Service



Notification 09/2013 - service tax issued on 08th may, 2013 has amended service tax abatement on construction services.

 The position of service tax on construction service is explained below:

Sr. No
Description of Service
Taxable Proportion
 (%)
Effective Rate (%)
1
Point of Taxation on or after 8th May, 2013

Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, except where entire consideration is received after issuance of completion certificate by the competent authority,-

(a) for a residential unit satisfying both the following conditions,
namely:–

(i) the carpet area of the unit is
less than 2000 square feet; and
(ii) the amount charged for the
unit is less than rupees one crore;
25 %
3.09 %

(b) for other than the (a) above.

30 %
3.708 %
2
Point of Taxation on or after 1st March, 2013 and before 8th May, 2013

Construction of a complex, building,
civil structure or a part thereof,
intended for a sale to a buyer, wholly
or partly except where entire
consideration is received after
issuance of completion certificate by
the competent authority,-

(i) for residential unit having
carpet area upto 2000 square feet
or where the amount charged is
less than rupees one crore;







25 %







3.09 % 

(ii) for other than the (i) above.
30 %
3.708 %
 3
Point of Taxation on or after 20th June, 2012 and before 1st March, 2013

Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority
25 %
3.09 %



There are following two conditions for availing abatement:


(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004;

(ii) The value of land is included in the amount charged from the service receiver.


Summary:-
 (1)      After 20th June i.e. from Budget 2012, the construction of building whether residential or commercial, was subjective to service tax of 3.09%

(2)      From Budget 2013 i.e. from 1st March, 2013, construction of residential house up to 2000 sq. Feet (consideration may be more than Rs. Crore) or of residential house sold for less than Rs. 1 Crore (  carpet area may be more than 2000 Sq. Feet.) was 3.09%

a)      The effective rate of service tax was 3.09% if any of the one condition was satisfied:

àResidential House is of less than 2000 sq. Feet
                              OR
àResidential House is sold for less than Rs. 1 Crore

b)      For all other construction, the service tax rate was 3.708%

 (3)      From now onwards i.e. from 8th May, 2013 ,

a)      the service tax rate shall be effective 3.09% when both the above conditions are satisfied:

àResidential House is of less than 2000 sq. Feet 
                             AND
àResidential House is sold for less than Rs. 1 Crore

b)      For all other construction, the service tax rate was 3.708%

Thus earlier even if a residential house which was of more than Rs. 1 Crore but carpet area was less than 2000 sq. Feet effective rate was 3.09% and at the same time when carpet area of residential was more than 2000 sq. Feet but consideration was less than Rs. 1 Crore effective rate was 3.09%.

However from 8th May, 2013, residential house of up to 2000 sq. Feet and sold for up to Rs. 1 Crore shall be liable for service tax of 3.09% and all other  residential commercial houses shall be subjected to service tax of 3.708%





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