In a decision that might have an impact on realty prices in the metropolis and nearby areas, the Bombay high court has upheld the decision of the union government to levy service tax on construction of flats and shops A division bench held by Justice DY Chandrachud andJustice Amjad Sayed on Friday upheld the decision of the Centre to levy service tax, saying it was legal and constitutional.
Maharashtra Chamber of Housing Industries (MCHI) had filed a petition challenging the decision mainly on the ground levying service tax on land and landed properties was the prerogative of the state government and therefore the Centre could not impose such tax on the construction industry.
MCHI prayed that the Centre's decision to levy service tax on construction of properties may be struck down as it was illegal and unconstitutional.
The Union government had amended the Finance Act of 2009 and imposed 2.5% service tax on construction of flats and shops with effect from July 1, 2010.
The bench concurred with the argument of the Additional Solicitor General of India Darius Khambata that construction activity was a service and so the union government was empowered by the Constitution to levy service tax.
To buttress his argument, Khambata cited several Supreme Court judgements and also quoted provisions of Maharashtra Ownership of Flats Act which allows registration of flats and shops even before they are constructed and are ready for possession.
The judges however felt that the decision of the Centre was absolutely legal and constitutional and that it could levy service tax on the construction of properties such as flats and shops.
Well there we go another burden of tax on common man. So now we have to pay VAT as well as service tax for buying new house.
How do we define the word 'construction'. Does it mean construction started after July 1, 2010 or even building building which are in construction stage before
July 1, 2010 . And if building are in construction stage will service tax be applicable on percentage remaining to be completed after July 1, 2010 or on whole amount. Because i guess arrange for such is money is not easy for a common man.
I hope they define word construction more properly.
Please My dear CCI friend share your view on this decision of High Court.
Regards,
RAJESH CHOUDHARY.
CAclubindia
