The Hindu Business Line : Service tax on residential complexes

Is service tax will be applicable to residential buildings in a housing colony in which each of the buildings does not have more than 12 residential units but there are more than 12 residential houses in the same complex?

Ramesh Joshi

The scope of service tax on construction of a complex, under Section 65(30a) w.e.f. June 16, 2005, is very wide. It will cover single building as well as group of buildings (more than one). The taxable event is construction of complex meant for residential use. Residential complex means any complex (horizontally spread or a vertical tower) comprising building/buildings having more than 12 residential units, a common area and one or more of other facilities such as park, parking area, lift, common water supply, community hall, etc.

Residential unit means any single house/apartment intended for use as a residence. Thus, construction of a building comprising 13 or more dwelling units, flats or apartments will be covered for service tax provided it has some specified common facilities.

Also, a campus, premises or colony housing more than 12 residential houses or apartments (whether single or otherwise) will also be covered subject to such colony or premises also having specified common facilities. The service tax is on all such residential units and not merely to a building having more than 12 dwelling units. Thus, housing projects with row houses, villas, bungalows would also be covered.

Cenvat credit on capital goods

A bank branch buys locker cabinets. As per Central Excise Tariff No. 83, it is not covered under the Tariff list specified in the definition of capital goods under Cenvat Credit Rules, 2004. As it is not eligible for capital goods credit, can the bank branch consider locker box as an input for its services? However, it is an asset for the bank and comes in the asset side of the balance-sheet. Can Cenvat credit be allowed?

Paul Raj

As rightly stated in the query, because of specific classification of safe deposit lockers and the definition of capital goods as per rule 2(a) of Cenvat Credit Rules, 2004, locker cabinet is not a capital good and no Cenvat credit can be utilised in respect of such goods. On whether the locker can be treated as input, one needs to examine the definition of `input' as defined in Rule 2(k) of Cenvat Credit Rules, 2004. Accordingly, input means:

i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production.

(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service.

An examination of the meaning of input as per Rule 2(k)(ii) would reveal that goods shall mean "all goods... used for providing any output service". The use of words `all goods' has been done without any limitation or condition and, as such, it appears that the same can be treated as goods and, thus, as input. In the absence of such `goods', a bank cannot provide any output service relating to safe deposit lockers. .

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