Service Tax on Real Estate Transactions
Service tax on real estate transactions implication on almost every sector, and real estate is no exception. With the introduction of the negative list concept since July, 2012, the scope of applicability of Service tax has increased manifold .
A summarized analysis is contained herein providing guidance on the implication of Service tax on various forms of real estate transactions.
Service tax is leviable only on the taxable services provided in the taxable territory and hence the services provided outside the taxable territory would be out of the service tax net. At present, the service tax levy extends to whole of India except the state of Jammu and Kashmir.
The present rate of Service Tax is 12.36%, consisting of Service Tax 12%, Education Cess 2% and Secondary Education Cess 1% thereon. However in certain cases abatements are available as mentioned here-in-after.
WHAT IS SERVICE?
‘Service’ means –
• Any activity
• carried out by a person for another
• For consideration
• And includes a declared service.
However ‘Service’ does not include an activity that constitutes merely–
• transfer of title in goods or immovable property by way of sale, gift or in any other manner
• Transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of article 366 of the Constitution
• Transaction in money or actionable claim
• Service provided by an employee to an employer in the course of the employment.
• Fees taken in any court or a tribunal set up under a law for the time being in force
In the present Service tax regime, all services other than the services specified in the negative list are taxable. However, specific exemptions are available to certain services as listed in the Mega Exemption Notification.
Some of the services which are commonly prevalent in the Real estate sector are discussed below:
1. RENTING OF IMMOVABLE PROPERTY
2. CONSTRUCTION SERVICES
• CONSTRUCTION OF RESIDENTIAL COMPLEX
• COMMERCIAL OR INDUSTRIAL CONSTRUCTION
• SPECIAL SERVICES BY BUILDERS
3. WORKS CONTRACT
4. MAINTENANCE/ MANAGEMENT OF IMMOVABLE PROPERTY
5. SERVICES UNDER REVERSE CHARGE MECHANISM (LIABILITY AS SERVICE RECIPIENT)
6. RENTING OF IMMOVABLE PROPERTY: