Service tax & sales tax on new flat purchase...
Ramanujam AR
(Querist) 30 September 2013
This query is : Resolved
Hello, Greetings! I have booked for purchase of a new flat with a condition that cancellation before UDS registration would attract a penalty of Rs.5K. I have paid couple of cheque payment as advance payment for the flat. S&C agreement and UDS registration is yet to be done. Now due to changes on my personal side, I decided to cancel & gave a cancellation letter to the builder asking him to repay the advance paid after deducting 5K cancellation charge. However, the builder is saying that he paid Service & Sale Tax for my flat & would be deducting the same & repay the balance. When the S&C agreement & UDS registrations were not done, I wonder how Service Tax would become applicable; My queries are:
a) Would the Service Tax be applicable for flat of any value? Total cost for my flat is 28Lakhs
b) How to handle this so that I don't loose my hard earned money with the builder.
Thanks in advance - Ram
Anirudh
(Expert) 30 September 2013
Dear Mr. Ramanujam,
You have to appreciate that whenever the construction contract is entered into, the builder as and when he receives the amount from the prospective client has to remit the service tax and VAT.
Therefore, having already paid to the Govt., the Service Tax/VAT, the builder would have no option, but to deduct the same when he repays the amount paid by you.
R K JAIN
(Expert) 30 September 2013
Sales tax is recoverable only on sale and builder can not recover the sales tax in case of cancellation of flat.
Ramanujam AR
(Querist) 01 October 2013
Thank you Mr.Jain for your advice on Sale Tax.
Mr, Anirudh, From your response, I understand that the builder remits the Service tax to Government as and when he receives payment from prospective client provided Construction Agreement is signed. However, I have not signed either Sale nor Construction Agreement with the builder. In such a scenario, even if the builder has paid the Service tax, I have following queries:
a) I am sure he would have got a receipt for the Service Tax paid. Would that receipt has reference of the flat that I intended to purchase (or) would that be a consolidated receive for a group of flats?
b) Now that I am cancelling my purchase, what's the best way to get a refund of the Service Tax paid - either from the Government or from the builder. Anyway, the builder is going to charge Service Tax to another prospective client when he/she purchases the same flat.. Right?
Thank you...
