Taxmen zero in on real estate builders

RUN UP TO BUDGET 2006

Field teams asked to file weekly action taken reports

The Directorate of Service Tax has decided to tighten the screws on real estate builders in order to mop up as much revenue as possible in the remaining days of the current fiscal year.

A directive, issued to all field formations, urges them to intensify their efforts as tax collection under the head of construction of complex service is reportedly too low.

The field formations have been further instructed to inform Central Board of Excise and Customs (CBEC) Member (service tax) Kailash Sethi every week of what action they have taken.

The directorate noted that most builders were avoiding registering for payment of service tax because of a circular issued by the CBEC in September 2004 which said that "estate builders" (firms that get such construction done) were not in the ambit of these services.

"The specific exclusion of estate builders in the case of 'commercial or industrial construction service' appears to have been considered on account of sales of commercial complexes by estate builders as a final outcome, although the definition of the Finance Act, 1994, does not provide for such exclusion," the directorate said.

The directorate also cited a recent Supreme Court decision in a case involving Raheja Development Corporation and the State of Karanataka where the apex court clarified that the activities undertaken by builders for construction of flats for or on behalf of prospective customers were covered under the works contract and therefore came under service tax.