Service Tax applicable ?

Hi,

I have a query regarding the payment of Service Tax. I have booked a flat in Bangalore with Oceanus Dwellings...The construction started way back in May 2006. The apartment complex consists of more than 12 units and as per the builder they have outsourced the work to multiple contractors...

Now the query is .. when I booked the flat in Feb 2008, the builder never mention anything about Service Tax. Now the construction is almost ending and they are telling that I have to pay a service tax of 4.12 % and sales tax of 4%. Could you please let me know if I have to pay the service tax ?

On the "Agreement to Sell" document they have mentioned the following in the payment section after the section of the total Flat's Cost:

"Apart from the aforesaid sale consideration as set out in clause 1 above, the Purchaser/s shall also be liable to pay: a) The deposits and/or other charges or levies demanded or required to be paid Bangalore Development Authority, Corporation of City of Bangalore or any other Governmental/Statutory Authority and or other taxes if any (current or future) and levies that may be applicable/payable to Central or State Government or any other authorities, betterment or other levies in regard to the schedule 'C' apartment."

Kindly let me know.

Thanks is advance !

Chintu Raju

The builder is required to tell at the time of sell what taxes are to be paid. When he has not stated this, the buyer may refuse to reimburse the taxes to the builder.

Such non disclosure at the time of contract introduces vagueness in the contract and the contract may be declared null and void for yhis reason only. A buyer is not expected to know the service tax, or for that matter any tax liability of the seller. Further, he is not expected to examine the business of the builder to ascertain service tax liability. Any demand of taxes at this stage by the builder is introducing vagueness in the contract, and the buyer may move the court to declare the contract null and void, and recover his amount.

Further, such non disclosure is also deficiency in service by the builder, for which he may be held responsible in the consumer court.

The buyer may sent a legal notice to the builder and try to settle the issue. Otherwise, he may take appropriate legal action.