Value Added Tax Service Tax Income Tax

Composition Scheme U/Sec. 42(3) Actual Expense Method Standard Deduction Method Composition Scheme

5% tax on Agreement Value No Deduction of Land Value from Agreement Value Input Tax Credit is available subject to Retention of 4% 100% Tax Credit on Capital Goods Option to Contractors - Contract Wise Agreement Value:- Total Contract ValueXXXX Less:- Sub-Contract ValueXXXX Balance Contract Value

Applicable when Land or Interest in land is also conveyed to the buyer along with transfer of property in goods Deduction of Labour & Service Charges is available on actual basis Land deduction is also available but maximum up to 70% of the contract value Set off is available on all inputs

Total Works Contract Value (Value of Entire Contract)XXX (Agreement value or Stamp Duty value, which ever is higher) Less: Allowable Deduction u/r 58(1A) for land cost: XXX (Land value as per Bombay Stamp Rules as on 1st Jan of the Year) (maximum 70% of agreement value) Less: Allowable Deduction u/r 58(1) for labour/services: Sub–Contract price paid - (SC shall be RD; Under form 408 & 407) XXX Labour/service Charges for execution of WC XXX Planning, Designing & Architect’s fees XXX Hire Charges or otherwise, for obtaining Machinery & Tools for WC XXX Cost of Consumables in which there is no transfer of property e.g.: Water, Electricity, Fuel, etc. XXX Cost of Establishment relatable to supply of labour & services XXX Similar other expenses relatable to supply of Labour & Services XXX Profit relatable to supply of Labour & Services XXX XXX

Applicable when contractor has not maintained accounts which enable a proper evaluation of the different deductions Deduction of land cost will be allowed 30% Standard Deduction from the remaining amount Set off will be available on all the inputs For this purpose Agreement Value will be:- Total Contract ValueXXXX Less:- Sub-Contract ValueXXXX Net Contract Value XXXX

Sr. No.Stage During Which the Developer enters into a contract with the purchaser Amount to be determined as a value of goods involved in works contract 1Before issue of the Commencement Certificate.100% 2From the Commencement Certificate to the completion of plinth level. 95% 3After the completion of plinth level to the completion of 100% of RCC framework. 85% 4After the completion of 100% RCC framework to the Occupancy Certificate 55% 5After the Occupancy CertificateNIL

1% Tax on Agreement Value Agreement Value:- – Value specified in Agreement or – Value for the purpose of Stamp Duty, whichever is higher No deduction for Land Cost No Input Tax Credit is available

Agreement must be registered Dealer should include the agreement value in turnover of sale in the period in which agreement is registered Payment of VAT should be made electronically In relation to the contracts against which he is paying tax under composition scheme, he must not use goods purchased against C – Form Dealer should not issue Tax Invoice

Applicability:- – Applicable for Works Contract Transaction – Employer employing Contractor for Work Contract – Payments are exceeding Rs. 5 Crore Rate of WCT:- – 2% in case of Registered Dealer – 5% in other cases Non Applicability:- – In case of Inter state trade – Payment made to Sub - Contractor

Employer to obtain registration / Tax deduction number in Form No 401 within 3 months from the day he become liable to deduct the tax. Remittance of tax to Government Treasure in within 21 days from the expiry of the month Employer shall maintain the record of amount of tax deduction Employer is required to file annual TDS return

Q. 1) Many times mere advances are received and agreement is executed much later. What will be the point of liability? Q. 2) The builders receive non-refundable deposits and other charges under the agreement such as electricity deposit, water charges, etc. Whether such receipts will also form part of sale price for VAT? Q. 3) Can the VAT applicable in above cases be collected by raising a debit note or the same should be mentioned in the agreement itself? Whether VAT should be collected on each installment or at one go upon execution of the agreement? Q. 4) What will be the VAT implications where mere advances are received from buyers and agreement for sell is not executed with the buyer?

Q. 5) Who is the proper authority to grant the completion letter? Q. 6) In the event where an agreement entered into is cancelled and said flat is sold to someone else and the agreement is again entered. What would be the VAT implication for the first sale and the second one? Q. 7) If builder constructs the flat on the land which is owned by land owner and out of the constructed flats some flats are given to land owner and other flats are sold by builder to prospective buyer. Land owner sales the flat afterwards to buyers. In such instance what will be the point of taxation? Whether land owner is liable to pay the VAT on sales of flats which were handed over to him by builder?

Maharashtra Government Proposes 5% entry tax on Long Steel. Long Steel products include billets, blooms, re-bars, wire rod, sections, sheet piles and drawn wire.

The Department and the builders have always been at dispute when comes to leviability of service tax on the consideration received in advance from the prospective buyers of immovable property to be constructed. After the negative list regime the construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly has been declared to be a service liable to service tax. However, if the entire consideration from the prospective buyer is received after issuance of completion certificate by competent authority then it is outside the purview of declared service.

Types of Service Works Contract Service i.e. Labour + Material Regular Scheme Composition Scheme Construction Service 70% Abatement 75% Abatement

Works Contract Service Shall include:- – labour charges for execution of the works; – amount paid to a sub-contractor for labour and services; – charges for planning, designing and architect's fees; – charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; – cost of consumables such as water, electricity, etc; – cost of establishment of the contractor relatable to supply of labour and services; – other similar expenses for Supply of Labour and Services – profit earned on Supply of Labour and Services

Sr. No.SituationValue of Service in execution of works contract AIn case of original works contract40% of the total amount charged for works contract BIn case of works contract entered into for maintenance or repairs 70% of the total amount charged for the works contract

The term ‘original works’ means: i. All new constructions; ii. All types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; iii. Erection, commissioning or installation of plant, machinery or equipment or structures, whether prefabricated or otherwise;

DescriptionAbatementTaxableCENVAT availability Construction of complex or building- 1)For Residential Unit - having carpet area less than 2000 Sq. Ft. AND - Amount charged is less than Rs. 1 Crore 75%25% Credit allowed only on :- - Capital Goods - Input Service 2) For other than the (1) above70%30% Credit allowed only on :- - Capital Goods - Input Service

Services by way of Construction, Completion, Fitting out, repair, maintenance, renovation, alteration in respect of: Civil Structure for Non‐Commerci al Purpose Historical Monument etc. Structure for use as clinical, educ ational, or cultural establishment Canal, Dam Etc Pipeline, Conduit Etc. Residential Complex for self of e mployees of above Services by way of Construction, Completion, Fitting out, repair, maintenance, renovation, alteration in respect of: A road, bridge, tunnel, etc. Civil Structure under Jawaharlal Nehru National Urban Mission or R ajiv Awaas Yojana A building owned by entity registere d under Section 12AA of Income Tax, 1961 A pollution Control plant Structure for burial, funeral etc.

Services by way of construction, erection, commissioning, or installation of original works pertaining to- an airport, port or railways (including monorail or metro) single residential unit otherwise than as a part of a residential complex; low- cost houses up to a carpet area of 60 square meters post- harvest storage infrastructure for agricultural produce mechanized food grain handling system, machinery or equipment for units processing agricultural produce

Nature Of ServiceService ProviderService ReceiverPercentage of Service Tax which is to be born by Service Provider Service Receiver Works Contract Service Individual / HUF/ Partnership Firm Body Corporate 50% Works Contract Service Body Corporate Body Corporate 100%Nil

In case of Construction Service, Taxability will arise on Date when invoice is issued for services provided or to be provided; (invoice is required to be issued within 30 days, otherwise, the point of taxation will be the date of provision of service) Date when the payment is received for services provided or to be provided; whichever is earlier

Works Contract Service is covered under Continuous Supply of Service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service.

Q. 1) We have received land from the land owner and we have agreed to give him some flats in lieu of the land. Is service tax payable? Q. 2) Service tax has been charged to customer and deposited with department. Later, customer surrenders the booking and refund is made to him. What are the implications in service tax? Q. 3) Can we adopt different valuation methods for different contracts?

Finance Act, 2013 has inserted a new section 43CA under the Income Tax Act, 1961 which is applicable from Financial Year , introducing the provisions for taxability of transfer of immovable property (land or building or both) held in the nature of stock in trade, on the same lines which are applicable for immovable property held in the nature of “capital asset” under section 50C of the Act.

The provision of section 43CA shall thus be applicable, inter alia, for the real estate developers and builders who are dealing in real estate properties. This section requires that in case land or building or both, is transferred by a trader/ a real estate developer for a value less than stamp duty value notified by the stamp duty authority, stamp duty value in such a case shall be deemed to be the full value of the sale consideration to such person and he shall be required to compute his taxable business income by substituting the actual sale consideration with the above mentioned deemed sale consideration. Section 50C of the Income Tax Act, 1961 was introduced by Finance Act, 2002 w.e.f which prescribes similar provisions in the case of transfer of land or building or both held in the nature of “capital asset”.

Provision of Section 43CA is applicable to – all categories of assesses who deal in immovable property being land or building or both. – all kind of immovable properties being Land or Building or both, held as stock in trade. – transfer of ownership of property by any mode

Relevant Date:- – Stamp Duty valuation is to be taken on the date of entering into Sale Agreement instead of value on the date of transfer of Property Valuation Officer:- – In case Fair Value assessed by Valuation officer is also less than Stamp Duty then such Fair Value shall be considered for the purpose of applicability of the provision of section 43CA.

Real Estate developer operates, interalia, in a manner where booking of plot/flat is made by way of issue of allotment letter to the buyer or by way of entering into an agreement with the buyer for the plot to be developed or flat to be constructed in future. Buyer keeps on making periodical payments in installments linked with the construction or otherwise. The property comes into existence after a period of several years, generally 3-4 years. Possession of the property is generally handed over by the seller to the buyer after receiving full value of the consideration. Registration of the documents transferring the property is executed in favor of the buyer simultaneously at the time of handing over the possession or at a later date, as may be mutually agreed.

Whether effect of section 43CA is to be given in the books of accounts? – Since section 43CA creates a deeming fiction for substituting the sale consideration with no corresponding receivable to come into existence, any effect on taxable income due to applicability of the provision of Section 43CA is to be given in the return of income only in the year in which transfer of property takes place. No accounting treatment in the books of accounts is thus required to be given and, provisions of Section 43CA will not affect revenue recognition process in the books of accounts.

Responsibility:- – Transferee is required to deduct Tax on transfer of Immovable Property at the time of Payment or at the time of Credit of such sum to his account – Whichever is earlier Exemption:- – No tax to be deducted where the consideration is less than 50 Lacs TDS Rate:- – TDS to be 1%

Amount Covered:- – Any sum paid by way of Consideration for transfer of Immovable Property is covered under this section. Transferor:- – Payee is Resident Transferor of Immovable Property Immovable Property:- – Any land other than Agriculture Land or any building or Part of building

Agriculture Land:- – Agriculture Land means Agriculture Land situated in India but following shall not be treated as Agriculture Land Situated within the Jurisdiction of Cantonment Board which has a population of not less than 10000, or Situated in any area within below given distance Population of MunicipalityDistance From Municipal Limit or Cantonment Board More than 10,000 but not exceeding 1,00,000 Within 2 Kms. More than 1,00,000 but not exceeding 10,00,000 Within 6 Kms. Exceeding 10,00,000Within 8 Kms.

Effect on Rate of tax on non furnishing of PAN:- Then deductor will Deduct tax at source at higher of the following rates: The rate prescribed in the Act; At the rate in force i.e. the rate mentioned in the Finance Act; At the rate of 20% Due Date of Payment:- – Any sum deducted under Section 194IA shall be paid to the credit of CG within 7 Days form the end of the month in which deduction was made.

Applicability:- – To every establishment or factory employing 20 or more than 20 employees. – All branches shall be treated as part of same establishment. – Once this Act is applicable to any establishment then it shall continue to govern by this provision even though the employee strength reduces to less than 20. – While determining the limit we have to count Part Time Employee Piece Rated Employee Temporary Employee on Regular Basis But it shall not include any person employed on account of some emergency.

Eligibility:- – Employees whose monthly BASIC PAY is Rs. 15,000 or less are required to become member of the EPF Scheme. Earlier this limit was of Rs. 6,500. Rate of Contribution:- – Employee’s Contribution - 12% – Employer’s Contribution % Basic Pay:- – All emolument earned by employee while on duty or on leave in cash in accordance with the terms of employment. But does not include Cash value of Food Concession Allowance

Damages:- – Simple 12% P.A. for Delayed Payment – Rate of Damages on delayed payment of Contribution ranges from 17% to 37% P.A. in addition to the Simple Interest. Finance Budget 2015:- – for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution. But the budget proposal did not specify the salary threshold for this.