By TIOL News Service

CHENNAI, NOVEMBER 25, 2008 :  AS per Section 65 (30a) “construction of complex” means :-

•  Construction of a new residential complex or a part thereof; or

•  completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or

•  repair, alteration, renovation or restoration of, or similar services in relation to, residential complex;

Residential Complex has been defined under Section 65 (91a) as

“Residential complex” means any complex comprising of—

•  a building or buildings, having more than twelve residential units;

•  a common area; and

•  any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system,

located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person.

It appears that there is an opinion among many that in case where the individual houses are constructed in what they call as “gated communities”, such construction service is also taxable under the above service as it has “more than twelve residential units”

In the present case before the Tribunal, the above question arose as to whether such construction of individual houses is a taxable service. The CESTAT has referred to the definitions as mentioned above and held that for levy of service tax, it should be a residential complex comprising more than 12 residential units. The appellants constructed individual residential houses, each being a residential unit. The law makers did not want construction of individual residential units to be subject to levy of service tax. The Tribunal was also not impressed with the plea that, from 1.6.2007, an activity of the one in question might be covered by the definition of ‘works contract'.

Before parting:

It appears that the CESTAT has not referred to the following explanation while examining the provisions of Sec 65(91a)

Explanation . — For the removal of doubts, it is hereby declared that for the purposes of this clause, —

(a) “personal use” includes permitting the complex for use as residence by another person on rent or without consideration;