Tuesday, June 7 2005 21:52 Hrs (IST) - World Time -

New Delhi: Housing Flats in apartments with more than 12 units will become costlier with the levy of service tax on construction of residential complexes along with eight other services from June 16.

A notification issued today (Jun 7, 2005) said that service tax of 10 per cent and 2 per cent education cess on it will be extended to nine new services including construction of residential complexes having more than 12 residential houses or apartments together with common areas.

The service tax will be levied only on the construction services, senior Finance Ministry officials said, adding there would be 67 per cent abatement for turnkey contracts and the tax would be levied on the remaining 33 per cent of the cost.

In the case of labour contract, the service tax would be on the entire contract rendered by the builder as the owner bears the input material costs, Advisor to Finance Minister Parthasarathy Shome told reporters.

The Budget for 2005-06 had brought in nine new services under the tax net taking the total taxable services to 80 besides extending the scope of 12 existing services to mop up Rs 17,500 crore as against Rs 14,000 crore in the last fiscal.

The other services that are to attract tax are transport of goods through pipeline, site formation and clearance, excavation and earth-moving and demolition services, dredging of rivers, ports, harbours, backwater and estuary, survey and map making other than Government departments, cleaning services, membership of club or association, mailing list compilation and mailing.

Referring to the Budget, Shome said that the threshold for service providers has been pegged at Rs 3 lakh and this would take off small service providers from the tax net.

The scope of existing services has also been expanded for commercial or industrial construction, erection, commission and installation, maintenance and repair, broadcasting services including those by MSO and DTH, sound recording, video-tape production, restoration of motor cars, beauty parlours, manpower recruitment, franchisees, business auxiliary services and outdoor catering.

However, the Government exempted some of the services like construction of ports, site formation for infrastructure projects, polishing or processing of gems and jewellery, shipping services bought and consumed abroad by an individual.