Construction of residential complexes was made a taxable service w.e.f. June 16, 2005. ‘Construction of complex’ is defined in Section 65(105)(zzzh) of the Finance Act, 1994.

Taxable service means any service provided or to be provided to any person by any other person in relation to construction of the complex

Construction of a residential complex would encompass the following three major activities: a) construction of a new residential complex or a part of it; b) completion and finishing services — that is, which are ancillary and auxiliary to the main activity of construction and which may be necessary for making a residential or dwelling unit and improving upon a bare construction; and c) repairs, alteration, renovation, restoration or other similar services of existing residential complexes.

Thus, any service in relation to construction of residential complexes shall get covered. It may be noted that the taxability arises only when a service is rendered.

If one builds or undertakes an activity for self or where no service provider is involved, no question of taxability will arise. The taxable event is not the buying or selling of a residential complex but rendering services in relation to such complex.

The service is taxable only when it is provided by one person to another. Outright sale of flat is not covered, but the provision of services is.

Where a contractor provides services to the builder, service tax would be attracted. Thus, when builders hire a contractor the payment made to such contractor doing a particular job will be covered for service tax purpose.

If the instant case, if you have booked the residential apartment, you may have to pay service tax as this may also be stipulated in the agreement.

In the case of purchase of ready-to-use apartment, no question of service tax arises as it would mean sale of apartment not involving any service element and, as such, no service tax can be levied.

In any case, it is the service provider who is liable to pay service tax and you should admit the liability based on the agreement entered into.

SANJIV AGARWAL

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