Are home buyers exempted from paying SerTax

1177 views 4 replies

AOJSM

Student

93 Points Joined October 2008

hello all,

My sister (living abroad) bought a villa for 50lacs in hyderabad. The builder is asking her to pay VAT( @ 4%)and ServTax( @ 4.12%) on the "Cost of Construction=41 lacs" component. Is this correct???

So the point is, I was reading the site/forum and found few articles relating to the exemption given to homebuyers in terms of ServTax by the Govt of India. Is this still applicable as on Jan 2009, and I quote the following:

1. "/news/2007/9/service_tax_relief_for_home_buyers.asp"
2. "/news/2007/9/home_buyers_get_service_tax_waiver_.asp"

From these above articles I understand that she doesn't have to pay ServTax as demanded by the builder. Is

Please enlighten me on the issue and dont hesitate to ask me if u need any clarifications from my end.

Also can anybody tell the Circular Number issued on 23Aug,2007 regarding the same.So that it would be handy to have a printout and show the builder if needed.

Sai

Replies (4)

AOJSM

Student

93 Points Joined October 2008

I found one link pertaining to the above, i really dont know if it matters to the case above or not. Anyways all u learned people go thru and let me know where is it mentioned??

https://www.servicetax.gov.in/circular/st-circular07/st_circ_96-2k7.htm

Suresh S Anandham

Corporate Controller

122 Points Joined January 2009

Sai

I also got similar requests from one of the reputed builders to pay the service tax and the sales tax on the apartment purchase. I am attaching the notification issued by Commissioner of Service tax Bangalore in April 2008. As per this, the builder is supposed to pay the service tax if he engages one or more contractors to complete the service.

Still it is not clear whether the buyer will have to pay both the taxes (service and sales) on purchase of home.

Regards,

Suresh

AOJSM

Student

93 Points Joined October 2008

Originally posted by :Suresh S Anandham
"	Sai I also got similar requests from one of the reputed builders to pay the service tax and the sales tax on the apartment purchase. I am attaching the notification issued by Commissioner of Service tax Bangalore in April 2008. As per this, the builder is supposed to pay the service tax if he engages one or more contractors to complete the service. Still it is not clear whether the buyer will have to pay both the taxes (service and sales) on purchase of home. Regards, Suresh	"

/news/2008/4/chaotic_tax_axe_on_builders_.asp

hello Suresh,

Have u gone thru the circular link i attached in the 2nd message? https://www.servicetax.gov.in/circular/st-circular07/st_circ_96-2k7.htm

In the above link, the Reference Code : 999.03 / 23.08.07 mentions the nuances of the Exemption.

After going thru the attachment u sent, its really confusing me now....Basically its the builders who are supposed to be paying the ServTax, which they are imposing on the buyers/consumers. They are making money in the entire gamut and not willing to forgo the ServiceTax from their share of profit.

Actually I realised that it is us who need to bargain at the time of negotiations that we wouldnt be willing to pay the ST and VAT components. I wasnt aware of all these complicities at the beginning of the project. Well as they say "everyday is a learning experience", its turning out to be a expensive one though. :)

Strange, the expert forum has not answered yet on this issue. Looking forward to some useful suggestions & right guidance from them before drawing some conclusion.

Sai

Rajesh Kumar

Advocate- Tax

7806 Points Joined December 2008

The service tax payment liability is on the service provider- that is builder in this case. However, service tax is an indirect tax and hence the builder wants to recover the taxes from the buyer. But it depends upon the agreement- if 50 lacs is the consolidated price for everything, the builder has to bear the burden of service tax.

However, in this case the problem is different. The home buyer didnt appointed the builder for any service- the home buyer is byuing an immovable property under the Transfer of Property Act. It is a transaction in property, on which stamp duty is being paid. Where is the question of Service Tax.

Further, construction of residential premises has been made a taxable service. Here the question is villa- which is not a residential complex.

Regarding not replying to the queries by expert- many a times the queries are not clearly stated, and then it becomes difficult to answer. Further, if teh querist wishes answer from a particular expert, they can always sent that expert a personal message and i hope he will answer.