Service tax on under construction apartment
Karunesh
(Querist) 15 June 2016
This query is : Resolved
I have purchased an apartment in electronics city Bangalore which is under construction. Recently Delhi high Court Ordered Service Tax Exemption for under construction apartments. I checked with my builder but he says it's not applicable to Bangalore. I have asked for justification which he will give by next week.
I need your help.. is it possible? What should I do next?
vswaminathan
(Expert) 16 June 2016
OFFHAND
To say that "it's not applicable to Bangalore" doesn't prima facie sound right.Suggest to get back, if interested, after he informs of any 'justification.
Meanwhile, anyone directly or indirectly concerned, and itching to know more, may look up the thoughts being shared and made available in public domain.
vswaminathan
(Expert) 16 June 2016
To Add: May look up the ongoing exchange of thoughts on Facebook and Linkedin, also on the website of Taxguru.com,etc.,for clues on the not-so-clear,but deep implications of the cited HC Judgment.
P. Venu
(Expert) 16 June 2016
Is it a judgment or an interim order? Anyhow, the decision needs to be perused to offer any meaningful suggestion.
Rajendra K Goyal
(Expert) 16 June 2016
First go through full orders in the case
Suresh Kumar Bansal vs UOI [W.P.(C) 2235/2011
At:
https://indiankanoon.org/doc/139269890/
Karunesh
(Querist) 16 June 2016
@ Rajendra Sir,
I have gone through it but unable to understand. It would be good if you share key point with me.
advocatepassy@gmail.com 971794
(Expert) 18 June 2016
Normally judgements are applicable to only those who had approached the court for Redressal. But this one is bey d that. Builders are going for appeal. Similarly Sales tax Deptt will also go in appeal against this judgement. So until we hear the final verdict of SC on this issue, this is not going to be implemented
T. Kalaiselvan, Advocate
(Expert) 19 June 2016
some excerpt of the referred judgment:
The controversy involved in these petition relates to the question whether the consideration paid by flat buyers to a builder/promoter/developer for acquiring a flat in a complex, which under construction/development, could be subjected to levy of service tax.
The matter has been examined by the Board. Generally, the initial agreement between the promoters / builders / developers and the ultimate owner is in the nature of agreement to sell'. Such a case, as per the provisions of the Transfer of Property Act, does not by itself create any interest in or charge on such property. The property remains under the ownership of the seller (in the instant case, the promoters/builders/developers). 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 till the execution of such sale deed would be in the nature of 'self- service' and consequently would not attract service tax. Further, if the ultimate owner enters into a contract for construction of a residential complex with a promoter / builder / developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to service tax, because this case would fall under the exclusion provided in the definition of 'residential complex'.
In the present case, we find that there is no machinery provision for ascertaining the service element involved in the composite contract. In order to sustain the levy of service tax on services, it is essential that the machinery provisions provide for a mechanism for ascertaining the measure of tax, that is, the value of services which are charged to service tax.
In view of the above, we negate the challenge to insertion of clause (zzzzu) in Sub-section 105 of Section 65 of the Act. However, we accept the Petitioners contention that no service tax under section 66 of the Act read with Section 65(105)(zzzh) of the Act could be charged in respect of composite contracts such as the ones entered into by the Petitioners with the builder. The impugned explanation to the extent that it seeks to include composite contracts for purchase of units in a complex within the scope of taxable service is set aside.
The above are few excerpt and conclusion of the Delhi high court judgment.
Despite this, if you want more clarification you can consult any advocate through private consultation.
