Shruti Agrawal

Shruti Agrawal1. BACKGROUND: Services provided by the Builders/ Developers is not taxable prior 01st July 2010. It is taxable from 1st July 2010 onwards as per CBEC circular No. 108/02/2009-ST.

2. APPLICABILITY: Service tax is applicable on under construction property at the time of bookings/agreements made before the construction completes. Is the Flats/Apartments / Villas is given to land owners by a real estate company then service tax is also applicable on such unit.


a. As per Rule no. 05 of Place Of Provision Of Services Rules 2012, if any services provided directly in relation to immovable property including some of the specified services would be deemed to be rendered at a place where immovable property is located or intended to be located

b. In case the services are partially in taxable territory and partially in non-taxable territory, then the place of provision shall be the location in the taxable territory where the greatest proportion of service is provided as per Rule no 07. For e.g. if a service provider provides services in J& K(50%), Himachal (30%) and Punjab (20%) then its services is taxable in the Himachal Pradesh.

c. In case where the service provider and service receiver is located in the taxable territory and the immovable property is located or tend to be located in non-taxable territory then As per Rule No. 08, place of provision shall be location of the recipient of service.

4. ONE PERSON TO ANOTHER: Service provider and service receiver should be different persons. For e.g. if ABC Construction Co. construct own office then it is a self -service and not applicable to service tax.


a. Services provided to the Government, a local authority or a governmental authority by way of constructionerection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(a)  A civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b)  a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

(c)    A structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;

(d)  Canal, dam or other irrigation works;

(e)  Pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

(f)    A residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;

b. Services provided by way of constructionerection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a) A road, bridge, tunnel, or terminal for road transportation for use by general public;

(b) A civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

(c A building owned by an entity registered under section 12 AA of the Income tax Act, 1961(43 of 1961) and meant predominantly for religious use by general public;

(d) A pollution control or effluent treatment plant, except located as a part of a factory; or a structure meant for funeral, burial or cremation of deceased;

c. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-

(a)  An airport, port or railways, including monorail or metro;

(b)  A single residential unit otherwise than as a part of a residential complex;

(c)   low- cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

(d)  Post- harvest storage infrastructure for agricultural produce including  a cold storages for such purposes; or

(e)  Mechanized food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;


Description of taxable services Taxable percentage Abatement Percentage Conditions

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

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

(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 75
(b) for other than the (a) above. 30 70

NOTE: for the purposes of exemption– The amount charged shall be the sum total of the amount charged for the service including the fair market value of all goods and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract, after deducting-

(i) the amount charged for such goods or services supplied to the service provider, if any; and

(ii) the value added tax or sales tax, if any, levied thereon: Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.

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  1. Krieshan Groverr says:

    I hv an independent house which is old now and a lump sum contract is given to an architect cum builder to demolish and reconstruct the house ( stilt + 4 floors). He will charge architectural fee, PMC fee and lumpsum construction cost as per agreement.

    Please advise on GST applicability on construction contract part. will it be convered under exemption for single unit exemption?


    I had booked a under construction flat at Patna in January’ 2013 at Rs.39 lacs. Out of this amount Rs 30 lacs paid by me in phases and Rs 9 lacs is due for payment. Construction completed in March’ 2018. Registration of sale is yet to do. The builder is demanding service tax @ 4.5% of the cost. Would I have to pay service tax. At the time of agreement in January’2013 no such clause in agreement for service tax payment. Please guide me.

    1. CA Rahul Agrawal says:

      No, service tax will not be applicable on the interest payment on delayed payment received as per rule 6 of Service tax valuation rules

  3. Anjum Garg says:

    Hello ,

    We are in to Government Construction Business , We have submitted the Bid for Project on 15-02-2016 and we were the lowest bidder & Government allotted project on 23-03-2016 (Its a Residential for Police Officer at Police Line Project). I just want to know as per changes in Policies in Point No. 5. 100% EXEMPTED SERVICES COVERED UNDER NOTIFICATION NO 25/2012. As per this Servcie Tax is not applicable on us , Kindly Help ??


    Anjum Garg

  4. Naveen Bharadwaj says:

    Hi there,
    We are building a G+2 residential house in Bengaluru and have hired a contractor to execute the entire project at INR 1550 per sqft.
    The contractor now says that there will be an additional service tax to be paid by us on the total value of construction, in addition to the agreed pricing of INR 1550 per sqft.
    Could you please confirm if this is a legal practice? Should we pay the extra service tax or the contractor should bear this as part of the agreed price?

  5. Joyjit Dutta says:

    My father has a plan to buy one flat at corporation area in west bengal total area 1150 sqt. and carpet area 920 sqt. kindly let me know how much percentage service tax my father have to pay. Biswajit Dutta

  6. Gopi Kishore says:

    I am planning to buy ready to move apartment (already occupation certificate given) from builder — should I pay service tax and VAT???

  7. Shyam Putnala says:

    I’m planning to purchase an independent house, which is under construction, in a gated community, gram panchyayat location, Hyderabad. This is an owner’s plot, and there is an MoU between the owner and the builder. Request you provide me with the information on Service Tax and VAT applicable in this case. I heard that either or both of these taxes are either avoidable and/or can be reduced. Please throw light on these taxes.

  8. Akshay says:

    Hi , in Budget 2016 it is mentioned that if property is less than 60 sq mt which is aprox 648 sq ft then service tax will not be there. IS this true? if yest it will be effective from 1 st april 2016 ?? right

    I am in process of buying flat of salable area 841sq ft and carpet area 636 sq ft < 648 sq ft(60 sq mt). Can I avail this benefit and save my service tax? Is this 60 sq mt area is salable or carpet area?

  9. Omender says:

    Dear Sir, Is PLC charges and IFMD (Interest free maintenance deposit) Charges claimed by builder from Purchaser on under construction IT office space complex qualifies for Service tax . If yes than at what rate ?

  10. Paresh vala says:

    Dear sir I have taken house from a builder construction value rs.1200000+lend value rs. 125000 give me value of service tax my construction area 750 sqft

  11. G. Iqbal says:

    Hi Shruti,

    In table 6 (b), can ‘for other than the (a) above’ be used for commercial properties – Office Spaces of area less than 2000 sqf and value less than 1 crore?

    Please answer


  12. Abhishek says:

    Please send me detail of Service Tax applicable for below charges for under construction residential property (Flat) of size 1170 sq. ft. located in Greater Noida West (UP) area:

    1. Service Tax applicable on Floor PLC Charge of amount Rs. 93,600.00/-
    2. Service Tax applicable on PLC for Park Facing of amount Rs 1,17,000.00/-
    3. Service Tax applicable on Dual meter of amount Rs. 25,000.00/-
    4. Service Tax applicable on Covered Car Parking of amount Rs. 2,00,000.00/-
    5. Service Tax applicable on Advance Maintenance Charges of Amount Rs. 21060.00/-
    6. Service Tax applicable on Additional power backup of Amount Rs. 50000.00/-

    Best Regards,

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October 2020