We are engaged in construction and sale of residential flats. In most cases the sale occurs during the construction stage itself. We have been informed that in such cases, as construction services have been rendered to the customer, service tax liability comes up. Will the sale of flats attract service tax?

Where the initial agreement with the buyer is in the nature of ?agreement to sell? a fully constructed residential unit and the transaction of sale is completed only after complete construction of the unit, then such a case does not generally create any interest in or charge on property. Till the completion of the construction activity, the property belongs to the builder or promoter and any service provided by him towards construction is in the nature of ?self service?. It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex would be in nature of ?self service? and consequently would not attract service tax.

We are engaged in rendering both taxable as well as exempted services and accordingly comply with the service tax laws and procedures. We also avail the credit of input services and since we are not maintaining separate books of accounts, we were utilising the credit to the extent of 20% of output liability till March 2008. Accordingly, we have unutilised balance of input credit as on March 31, 2008. There has been an amendment in the service tax regulations and now service tax credit is allowed in the ratio of the turnover of the taxable and non-taxable services of the previous year. Please advice on the availability of the credit accumulated as on April 1, 2008.

Central Board of Excise & Customs has recently issued a clarification in relation to amendment in the Credit Rules. It provides that as there is no lapsing provision in the Credit Rules which bar the utilisation of accumulated credit prior to April 1, 2008, therefore, in the absence of a clear legal prohibition, this right cannot be denied. Hence the taxpayer would be entitled to utilise the accumulated credit as on April 1, 2008 for payment of service tax post-April 1, 2008.Therefore, you are eligible to carry forward and utilise the accumulated balance of cenvat credit.

We are a trader of IT-products and we sell imported items in the domestic market. We pay the appropriate customs duty on the import value of goods. Additionally, we pay a royalty to the supplier on sale of these goods. Does the royalty amount need to be included in the assessable value for the purpose of payment of the customs duty.

The valuation of imported goods has to be done in accordance with the Customs Valuation Rules. As per these the royalty/licence fees related to the imported goods that the importer is required to pay directly or indirectly as a condition of sale, is required to be included in the transaction value for the purpose of customs duty computation. Therefore, the royalty can be included only if royalty payment is a condition of sale. This aspect would need to be analysed based on the clauses of the agreement entered into by the supplier and the importer.

We are a real estate developer constructing a shopping mall and seek technical assistance of a company based outside India. The company doesn?t have an office in India and provide their services from abroad. We make the payment for their services in the foreign exchange. Being a service receiver, are we liable to pay service tax?

Under service tax laws, this activity comes under the purview of taxable service named as ?consulting engineer?s service?. As the foreign firm doesn?t have any fixed establishment in India, and the service receiver is based in India; the service recipient is deemed to be the service provider and is liable to pay the service tax.

?Respondents are senior professionals at Ernst & Young. The replies do not constitute professional advice, but are based on interpretation of facts available in readers? queries to the professionals. Neither Ernst & Young nor this publication is liable for any action taken on the basis of this information