• Though the rulings of the Authority are binding only on the applicant and the service tax department; but since the issue has been settled in favour of service tax department; all the Builders and Real Estate Developers who are not paying service tax on construction of residential flats and units are going to be slapped the demands of service tax. Majority of the Builders are neither charging nor paying any service tax on construction and sale of residential flats. The costs of residential flats and units is also going to witness a hike due to service tax liability. This may lead to a further slowdown in Real Estate market.

• The applicant is a developer of residential housing projects in Gujarat. As per the proposed activities No.1 & 2, the residential units will be constructed either on  its own or through a contractor and the residential units so constructed will be sold to third parties. The applicant will book the residential unit after taking a booking amount and the total cost of the residential house will be specified to the buyers at the time of booking.

• The proposed activities no. 3 & 4 consist of sale of plots of land inside the complex to the prospective buyers who will also enter into a works contract with the applicant for the construction of residential units. Under the proposed activity no. 4 the applicant will for the purpose of executing the contract with the buyer enter into works contract with  Contractors.

• The Authority has ruled in affirmative on all the following questions of law:

1.        Whether the activity of booking the residential units to be undertaken by the applicant is a taxable service liable to Service Tax under the provisions of section 65 (105) of the Finance Act, 1994 ?

2.        Whether the applicant is liable to service tax under section 65 (105) (zzzh) of the Finance Act, 1994 under the notified taxable service of Construction of Complex in case of Proposed Activity No. 1?

3.        Whether the applicant is liable to service tax under section 65 (105) (zzzh) of the Finance Act, 1994 under the notified taxable service of Construction of Complex in case of Proposed Activity No.2?

4.        Whether the applicant is liable to service tax under section 65 (105) (zzzza) of the Finance Act, 1994 under the notified taxable service of execution of works contract in case of Proposed Activity No.3?

5.        Whether the applicant is liable to service tax under section 65 (105) (zzzza) of the Finance Act, 1994 under the notified taxable service of execution of works contract in case of Proposed Activity No.4?

6.        Whether the applicant is liable to service tax under section 65 (105) (zzzza) of the Finance Act, 1994 under the notified taxable service of execution of works contract in case of Proposed Activity No.4, even when the petty contractors discharge service tax liability under the notified taxable service of execution of works contract?