BOOK-UNDER-CONSTRUCTION-FLAT-BEFORE-JULY-2010-TO-AVOID-3-30-

BOOK-UNDER-CONSTRUCTION-FLAT-BEFORE-JULY-2010-TO-AVOID-3-30-SERVICE-TAX-ON-AGREEMENT-VALUE.

Those looking to buy a house would do well to book one before July, when the new service tax levy on construction service will come into effect. The cost of flats will go up 3.3% of the total purchase consideration once service tax begins to be levied on construction.

The government is considering exempting from tax flats booked before the notification of the expanded construction service, a finance ministry official told “There is a case for giving relief to buyers who booked their houses before the service is notified… We are examining it,” he said.

So, a buyer who has booked a flat but will get possession only after the notification of the new service need not worry. A clarification to this effect may be issued when the tax is notified after the passage of the finance bill, he said.

The Union Budget proposes to expand the definition of construction service and levy tax on houses under construction as well. The new rule, which will come into effect when Parliament approves the budget, says service tax would be imposed if payments were made before the completion of construction.

Realty companies typically sell property before they begin construction and fear that the move will hit the sector hard as it would lead to a rise in home prices and depress demand. “The government must reconsider its decision to impose service tax on under-construction housing as the real estate industry is already paying 14-16% as indirect taxes. The current move will make affordable housing unaffordable in the future,” said the DLF spokesperson.

The government plans to include charges such as development fee, parking fee and premium location charges usually paid at the time of completion of construction in the base price. Only 33% of the base price of the flat will be chargeable to service tax levied at the rate of 10%, taking the effective tax to 3.3%.

“Since an amendment has been made in an existing service already under tax net, there are diverse views whether this will be operative from a specific date after notification or treated as a clarificatory amendment roping in construction-linked payment plans of houses under construction,” said Anil Kumar, CEO and deputy managing director, Ansal API. If it is to be operative from a prospective date, booking a house in the next 3-4 months may result in savings of up to 4% for a customer, he added.

However, the government remains firm on levying the tax. Revenue secretary Sunil Mitra said the proposal would not hike prices by more than 3.5%, an increase that could be afforded by the customers.

“Construction is a service. As a service, there is no reason why it should not be taxed,” he said. “It is only 3% or 3.5% that gets added up (for the buyer),” Mr Mitra added.

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SOURCE moneycontrol.com

media-companies-filed-petition-against-imposition-of-service-tax-on-copyright-services

PVR Pictures, Balaji Telefilms, Yash Raj Films and UTV Motion Pictures have moved the Delhi High Court against the government’s recent decision to levy service tax on copyright services. In a writ petition filed before the court on Wednesday, PVR Pictures said, by levying service tax on copyright services, the government was going beyond its powers entrusted under the Constitution.

The finance ministry introduced the tax for the first time on July 1, 2010. PVR Pictures, in its petition, alleged that copyrights are treated as goods and the transfer of copyrights are treated as sale of goods, which falls within the domain of taxation by states under Article 246, and not the Union.

The taxing entry for copyright services is contained in Section 65(105) of the Finance Act. The company said treating copyright as goods as well as a service is ultra vires (beyond the powers of) the Constitution of India and contravenes Articles 14, 19(1)(g), 265 and 300A of the Constitution.

As per the service tax notification, all entities transferring for use the copyright in any film or sound recordings would be liable to pay service tax at 10.3 per cent, as well as sales tax on the copyright.

PVR Pictures is the owner or co-owner of various copyrights of the films produced by it. It also acquires distribution rights to various films produced by other media houses. It uses copyrights like sale of music rights, sale of DTH rights and theatrical exploitation across cinemas.

The petitioner said this involves a transaction of sale of goods and such a transaction of distribution or exhibition involving transfer of the right to use copyright attracts value-added tax (VAT). The government notification had said transfer or allowing use of right should be subjected to service tax.

“Copyrights are intangible property and are liable to VAT. Charging service tax on the transfer of copyrights is a clear transgression of the powers of the states to levy tax on the sale and purchase of goods. The industry will not be able to survive if this duality of taxation is not done away with,” said Tarun Gulati, partner, Economic Law Practice (ELP), lawyers to PVR Pictures.

source: https://business.rediff.com/report/2010/jul/08/media-cos-oppose-tax-on-copyright-services.htm