A builder/developer has agreed to provide some flats/shops free of cost to the landowner who has given the land for construction. Is service tax payable in respect of these three flats/shops?
Really, the flats/shops are not given free but are in lieu of land cost. In such case, value of service will have to be found out on basis of value of service of identical or similar flat/shop or on basis of cost of construction plus reasonable profit. Two methods are available (a) Value of similar service (b) If value of similar service is not available, then cost plus reasonable profit [Rule 3 of Service Tax Valuation Rules]. In fact, land owner himself may be held liable to pay service tax when he sells the flat/industrial unit before obtaining completion certificate. Of course, he can argue that all service tax on construction service has already been paid by builder/developer and there is nothing to pay now. Valuation can be on basis of value of similar service or on cost plus reasonable profit, as provided in Rule 3 of Service Tax Valuation Rules. For extra items, i.e. items not covered in the agreement of sale, builder charges extra amounts. Whether service tax is payable on suc
