Aravind Balasubramanian (Software Engr. ) 16 July 2010

Service Tax - under construction flat

Dear Sir/Madam,
I had booked a flat in Chennai in Aug 2009 and it is under
construction. So far I have paid about 80% of the total construction cost to the builder and the last payment was made in mid June 2010. Last month my builder told me that I need to pay service
tax on the payments received by them from us so far. However, what I
have understood as per the latest circular is that service tax will
be applicable only for payments made from July 1, 2010. Is that correct?
But the builder is claiming that still there is no confirmation yet
by the govt on this and I need to pay the service tax whatsoever.
Kindly advise what I need to do in this case. Should I pay the
service tax or it is wise to hold back?

Thank you in advance for your guidance.

Reply Follow

2 Replies

Shayan Khan (B.com) 17 July 2010

i dont think that the notification will be made applicable retrospectively, the said provisions will be made effective w.e.f. 1/7/10 but let me go through the said notification once, then i will let you the implications.

Vineet (Director) 17 July 2010

The Service tax provisions in this regard have been made effective from 1-7-2010 only.

It has also been notfied that service tax calculated on advance paid prior to 1-7-2010 is exempt. Please refer to notification no 36 of 2010 dated 28-6-2010 as corrected by corrigendum dated 29-6-2010. Reproduced below:

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

Government of India
Ministry of Finance
(Department of Revenue)

New Delhi, the 28^th June, 2010

Notification No. 36/2010 - Service Tax

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services specified in clause (A) of section 76 of the Finance Act, 2010 (14 of 2010) other than services referred to in clause (zzc) and (zzzz) of sub-section (105) of section 65 of the Finance Act from so much of the service tax leviable thereon under section 66 of the Finance Act as is in excess of the service tax calculated on a value which is equivalent to the amount of advance payment received before the said appointed date.

Explanation.- For the purpose of this notification,

(i) “appointed date” means the 1^st day of July, 2010;

(ii) “advance payment” means consideration received for the said taxable services to be provided.

2. This notification shall come into force on the date of its publication in the Official Gazette.

[F. No. 334/3/2010 -TRU]

(K.S.V.V.Prasad)

Under Secretary to the Government of India

[TO BE PUBLISHED IN THE GAZZETE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

Government of India

Ministry of Finance

Department of Revenue

CORRIGENDUM

New Delhi, the 29^th June, 2010

G.S.R. (E).- In the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 36/2010- Service Tax, dated the 28th June, 2010 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 557 (E), dated the 28th June, 2010,

for the words “in excess of ”, read “equal to”.

[F. No. 334/3/2010-TRU]

(K.S.V.V.Prasad)

Under Secretary to the Government of India

Please show these to you builder. ST will be levied @2.575% on the advance to be paid by you after 1-7-2010 and prior to completion of building.