When a customer cancels booking for purchase of flat after having paid a few installments, the builder does not refund full amount of advance received from the customer.In other words, while granting refund to the concerned customer, the builder usually deducts some amount in the name of ' Cancellation Charges'. Under the new regime of taxation, whether amount retained by the developer on account of cancellation charge is liable to Service Tax?
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Cancellation charges
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Cancellation charge is in the nature of compensation. It is not consideration for a service provided. It is only a claim against a monetory or non-monetary loss. According to me same is not taxable.
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