Ankit Vasani (Sr. Technical Architect) 06 January 2014

Service tax on flat purchased during august - 2010

Dear sir,

I live in Vadodara, Gujarat.

I have purchased flat of Rs. 24 Lack on 10th May, 2010 and took a loan of around 18K. most the payment was made during June - 2010 - December 2011.

Although Builder has finished up building all six towers back in 2011, there are so many pending work like amenities mentioned in brochure. so until now. the process of the handover is not initiated hence till the date builder pas paying ele. bill for all common lights etc.

Now, all of sudden, builder held meeting and asking all members to pay service tax and said that they have paid service tax in May, 2013 and now you all will have to pay service tax to us. until you don't pay service tax, we will not complete the rest of the work.

Sir, i would like to know am I legally bound to pay service tax to Builder?

If not, what actions we can take against builder to get completed rest of the work.

If would be really greatfull if you can have a look at this issue and provide your valuable guidance on this?

Thanks,
Ankit Vasani

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3 Replies

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 06 January 2014

The Central Board of Excise and Customs, has clarified that "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

Ankit Vasani (Sr. Technical Architect) 06 January 2014

Thank you Ramachary for taking time to reply on this. sorry but i am still not clear that legally bound to pay service tax or not?

Thanks in advance

Prerna (law officer) 13 January 2014

Sir

I have read your blog and wanted to know about service tax applicable during the period of june 2006 till july 2010 properties for maharashtra

As k reheja decision came in 2013 and construction was considered as works contract .does the flats purchased during this period will attract tax liability or not .

I also want the actual tax aspect to work the tax calculation

Regards

PRERNA JAIN