Service tax on apartments
For a residential complex to be eligible for levy of Service tax, it should have the following three essential features:
a) Should have more than 12 units
b) Should have a common area
c) Should have common facility or services like park, community hall, lift etc.
There are several cases where a person can avail exemption from the imposition of Service tax. Service tax is not applicable, in the following cases.
a) If the residential complex is shaving only 12 or less than 12 units.
b) If the residential complex is constructed by an individual for his personal use.
c) Direct purchase of residential unit from a builder without availing the service of a building contractor.
Post construction services pertaining to residential complex are also treated as construction activity for the purpose of Service tax.
If the builder constructs a residential complex without engaging the services of a contractor (service provider), then he cannot claim the service tax from the apartment purchasers. Similarly, it is the primary duty of the contractor to pay the service tax, and not the builder or the apartment purchaser. If the condition to pay the service tax is not mentioned in the sale agreement, then the apartment purchasers need not pay the service tax to the builder.