As per sales of goods act, 1930 immovable property not covered under the defination of good. Section 2(7) specifically excluded the immovable property for chargability.
and Mr chopra this type of any circular or amendment not come under the VAT according to our knowledge.
Construction of complex” means —
a) construction of a new residential complex or part thereof; or
b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or
c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex;
“Residential complex” means any complex comprising of —
i. a building or buildings, having more than twelve residential units;
ii. a common area; and
iii. any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system,
located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person.
Explanation. — For the removal of doubts, it is hereby declared that for the purposes of this clause, —
(a) “Personal use” includes permitting the complex for use as residence by another person on rent or without consideration;
(b) “Residential unit” means a single house or a single apartment intended for use as a place of residence;
SCOPE OF SERVICE
Construction of residential complex service would generally cover construction service in respect of a building over 12 residential parts or units; such residential complexes are normally constructed after obtaining approval from statutory authority for their layout. For the purpose of this levy, residential complex means-
i. Any complex of a building or buildings, having more than twelve residential units within the said premises
ii. Having common areas (Stair case, road etc)
iii. Having common facilities or services ( Swimming pool, Gym , sports facility etc)
SERVICE TAX LIABLITY
From the above it is clear that, when construction of residential complex is having more then twelve dwelling units in a common area, and such premises being approved by an authority in law, would be liable to service tax. Further the said service would also cover post construction finishing service also. Based on the above definition, it is imperative, when residential complex consists of less than or equal to 12 residential units, then the same would not be liable for the purpose of service tax.
However the definition of Residential complex specifically excluded a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for use as residence by such person.
Further an explanation provides, personal use includes permitting complex for use as residence by another person on rent or without consideration.
Eg: ABC Ltd entering into contract with a contractor for construction of Residential complex, for the purpose of letting the same on rent for its employees, therefore the same would get covered under the exclusion list, since the same is used for personal use of ABC Ltd.
The aforesaid explanation created havoc in the industry, bringing a question mark on the levy of service tax itself on Residential complex, when any residential complex is constructed either for self occupancy or even on rent; the same would not attract service tax, thanks to the concept of personal use supported by its explanation. Since the aforesaid exception used the words any person. However the said view requires judicial confirmation on the aspect of personal use.
Subsequently circular 108/02/2009 –ST dated 29.01.2009, further created confusion, since the said circular completely brought in a new aspect which was not present in the aforesaid provision prior to inception of the said circular.
The circular read as under “if the ultimate owner enters into a contract for construction of a residential complex with a promoter/builder/developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to service tax.
Eg: If ABC Ltd enters into a contract with a promoter/builder/developer, but not with the contractor. Such promoter/builder/developer provides the services of designing, planning and construction, the said property is used by ABC ltd for itself or let the same on rent, the same would not be subjected to service tax.
However as per principle of law, circular can’t contradict the provisions of law. However looking into the intension of the circular which was introduced as a relief to overcome recession, and moreover the same was never challenged by the department, as circulars are binding on department and to add to its wounds it is assessee friendly, wherein assessee would take a benefit of the said circular.
I hope so yours every doubts has been cristal clear now.