Avoid service tax for less than 12 units building almost complete?

2532 views 5 replies

Sameer Panjwani

CEO

37 Points Joined September 2008

I am planning to purchase a flat in a building which has only 4 units. The project is due to be complete in 3 months time after which the builder will apply for the occupancy / completion certificate. I have paid token advance and according to the builder no service tax applicable as far as his knowledge goes. However, I have just read that under new Budget even buildings less than 12 units will have service tax applicable, is that true?

My questions are:

1) If so, how can I avoid paying service tax because then the cost will increase by more than a few lacs! Is the new rule applicable for buildings that have started construction long time back as well and are almost complete now or only applicable to buildings that begin construction now?

2) If I manage to convince the builder to pay only after he gets the occupancy / completion certiicate then will I need to pay service tax? I read that it is not applicable if you pay for a completed property.

Replies (5)

Sameer Panjwani

CEO

37 Points Joined September 2008

Would really appreciate inputs from anyone who knows about the latest changes to the law in the Budget. Have asked a couple of lawyers, they don't seem to have any clarity on the matter with some not even aware of this change.

I just don't want to be stuck with a demand notice for a service tax later after the property is purchased.

CA Unnikrishnan Nair N

Chartered Accountant

2083 Points Joined February 2011

New law will be in place after enactment. ie. by June, 2012. As per new law more than one unit is a complex and hence taxable. In respect of ongoing projects that come to the tax net because of the new defnition, services provided after date of enactment will be taxable unless some specific exemption comes later to exclude such ongoing projects.

Sameer Panjwani

CEO

37 Points Joined September 2008

Thanks, so is it safe then to go ahead with the agreement I am going to be taking part in assuming that there will be service tax that could be levied in the future, since the project is due to be complete by June 2nd week?

Or what would your advise be? What if project gets delayed, I should keep that in mind as well.

Guest

entc45

STO

21 Points Joined October 2012

Hello,

I booked a flat in pune in November 2011. I did registration of agreement to sale with builder on February 2012 with agreement value of 19 lacs. The building has got total 8 units i..e. less than 12 units. I got posession of flat in september 2012. I have made some payments after july 2012. Now builder is asking me to pay service tax at rate of 3.09 % of agreement value. I have following queries,

1) my building has got less than 12 units so can i claim that i am not entitled to pay service tax??

2) since residential complex defination has changed from 12 to 2 since july 2012 but my agreement got registered in Feb 2012. So service tax is applicable to me or not??

3) if I am liable to pay service tax then how much I should pay i.e. on what amount?? is it on payments made after july 2012 or will it be on whole agreement value??

I request you to please reply as soon as possible. Thanx in advance.