Levy of Service Tax on Residential / Commercial Construction has been matter of dispute which was settled by making it part of Declared Service from 1st July 2010. Section 66E of Chapter V of the Finance Act 1994 define Declared Services and as per Section 66E(b), construction of 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`.
Requirement of completion certificate vary from state to state. In case of Mumbai local authority provides for completion certificate after issue of Occupation Certificate. Many times Occupation Certificate and Completion Certificate is used interchangeably. Some people believe that Occupation Certificate is nothing but Completion Certificate, however both are difference. In the below paras I am highlighting Service Tax implication on completion of building.
Explanation to above section define “competent authority” means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:––
(A) architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
(B) chartered engineer registered with the Institution of Engineers (India); or
(C) licensed surveyor of the respective local body of the city or town or village or development or planning authority;
Further the expression “construction” includes additions, alterations, replacements or remodeling of any existing civil structure;
Above explanation make it very clear that completion certificate is must to get benefit of non chargeability of service tax or if there is no such local law requirement then any of the above three documents will fulfill law requirement for not charging service tax. Many times possession of flat or unit is given to the customer without charging service tax as Occupation Certificate is obtained whereas law provides for Building Completion Certificate resulting into future litigation with Service Tax Dept and as the possession is already provided to the customer it is very difficult to get the reimbursement of Service Tax from customer and effecting pocket of builder.
Above law requirement is further substantial by Point 6.2.7 of Education Guide issued by dept of service tax which is reproduced below:
“ In certain States requirement of completion certificate are waived of for certain specified types of buildings. How would leviability of service tax be determined in such cases?
In terms of Explanation to clause (b) of section 66E in such cases the completion certificate issued by an architect or a chartered engineer or a licensed surveyor of the respective local body or development or planning authority would be treated as completion certificate for the purposes of determining chargeability of service tax”
Hence to claim the benefit of immovable property and not to charge service tax to the customers, it is advisable to ascertain the whether Government Authority or any other authority which is authorized issue Building Completion Certificate or not and in the absence of issue of Building Completion Certificate by authority obtain any of the above documents for not charging Service Tax.
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