08 February 2012
Dear Sir / Madam Please suggest regarding the following queries:During audit of Real estate Developer, Audit Area: Sales Dept., It was observed that: TDS was deducted by some customers while making payment to builder as regards Advance Maintenance charges 1)Whether TDS is to be deducted by the unit holder from Maintenance charges to be paid to the Builder?Please quote the relevant section no. 2) Whether Service tax on Maintenance charges is applicable? Please quote the relevant Section no. Thanks
08 February 2012
Yes. Maintenance contract attract TDS under section 194C, so TDS applicable. TDS need to be deducted either payment or invoice booking which ever is earlier, so payment received first so TDS deducted by customer is correct only
Yes.Service tax attracts under Maintenance & Repairs services according to section.65(105)(zzg)
09 February 2012
Thanks for the respose My query is as follows: Builder is entering into agreement with the customer for sale of commercial unit. In agreement, builder mentions that before possession the following charges have to be paid: Agreement value Society charges Maintenance charges for one year Service tax, VAT, Service tax on Maintenance Corpus. While receiving Adv. Maintenance charges for one year, In some cases, Builder is getting the payment (Net of TDS) means TDS is deducted by the customer. Whether Customer should deduct TDS on payment of Adv Maintenance charges in above case. Your answer is regarding: where Builder is entered into contract with some agent for maintenance of society. In that case TDS will be deducted by builder while making payment to Contractor. Thanks
TDS applicable whether while receiving advance payment also. Payer has to deduct the TDS while paying to payee.
In your query builder is receiver of the amount. he also liable to TDS , he should receive the amount after deduction of TDS even in case of advance payment also
10 February 2012
Dear Sir What if the builder is charging the maintenance charges to the unit holder for reimbursement as the builder has to pay the same to the agency who looks after housekeeping, security, Lift, & other facilities. 1.Whether TDS to be deducted by the unit holder while reimbursing to the builder? 2.Whether Service tax is applicable when reimbursement is made to the builder for maintenance charges? Please quote the section no. Thanks
Incase Reimbursement expenses raised separately as debit note or separate invoice then no unit holder no need to deduct tds on builder payment. if builder raising the bill together with normal invoice such as same invoice then unit holder need to deduct TDS on total invoice including reimbursement
In related to Service tax
Service tax applicable on reimbursement of expenses also by the builder to unit holder
please read rule 5
As per Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 if the expenditure incurred as a pure agent of the service receiver, it should be excluded from the assessable value subject to the following conditions,
The service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured; The recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service; The recipient of service is liable to make payment to the third party; The recipient of service authorizes the service provider to make payment on his behalf; the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party; the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service; the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and the goods or services procured by the service provider form the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
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