Hi. I have been assigned an audit of a Pvt Ltd company which is engaged in the business of construction and sale of residential flats. They pay service tax at 4.944% since construction companies have an abatement of 40%. The practice of the management is such that they pay tax only from the date of registration of UDS and not for the advances that has been received prior to registration. And once they get it registered, they pay service tax as under:
Total amount receivable xxx
(-) Land cost xxx
(-) UDS registration cost xxx
(-) Corpus Fund xxx
(-) VAT xxx
Net amount XXX * 12.36% * 40%
The reason given by the management is that they do not want to unnecesarily waste their money by paying service tax in case a person who has paid the advance money could not get it registered due to pausity of funds from his side, in which case he may get back the money that he had paid as advance for the flat. Whether this is correct or wrong pl let me know as soon as possible.
CAclubindia
