The Hindu Business Line : Services of interior decorator

Our firm is engaged in doing interior carpentry and joinery work for individuals. This is done as work contract and the contract is not with the builder but with individual owner of the house/apartment. Does this attract service tax?

Eldo Rajan, e-mail

Providing interior carpentry and joinery work will be covered by `Interior decorator's services' if it goes beyond fixing doors and windows. As per Section 65(105)(q) of the Finance Act 1994, services provided by an interior decorator in relation to planning, design or beautification of spaces is a taxable service. Section 65(59) of the above Act defines `interior decorator'. The definition refers to services provided to a client who can be an individual or a legal person.

Probably, you may be of the view that providing this interior carpentry and joinery work is covered under `Construction services — residential complex services'.

As per the definition contained in Section 65(30a) of Finance Act 1994, construction of complex includes completion and finishing services, such as metal joinery and carpentry. In respect of such services, there should be a minimum of 13 residential units to attract service tax liability.

Therefore, if what you provide is only wood joinery/carpentry work for completion of the building, that is, limited to providing windows and doors, etc., to individual apartment owners, then such services will not attract service tax. If it extends to providing, for example, `show cases', etc., then such services will be covered by interior decorator's services and there will be tax liability.

Transfer of commercial complex

Is a commercial complex formed by a builder liable for service tax or VAT in the following cases:

i) The commercial complex is transferred by the builder to retailers before completion of the construction; and

ii) The complex is transferred by the builder to the retailer after completion of the construction.

Pradeep Garg, e-mail

Commercial complexes built by builders on behalf of a client will attract service tax under `construction services — commercial or industrial'.

If the construction of the complex is done on one's own name and then such complexes are sold in part or as such to other retailers, then in such a case, there is sale of building only and there is no service provided to a client. Thus it will not attract any service tax.

You have not indicated at what stage the complex is transferred to retailers before completion of construction. If it involves sale of undivided share of land before construction, and then construction of the complex on the basis of a separate works contract, then such construction activity will amount to providing of construction service to a client who owns the undivided share of land and, accordingly, there will be service tax. Now State governments levy VAT even on works contract and, therefore, on such contracts there is bound to be VAT too.

S. Murugappan

http://MentorQA.blogspot.com

Send in your queries to MentorAtYourService@gmail.com

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