Service tax on under construction property

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Ritika

Software Engineer

21 Points Posted on 29 August 2011

Hi All

I booked and registered the property in June 2010 worth Rs 60 lacs. I paid 10 lacs at the time of registration and took a loan of 50 lacs from a bank. Now the bank has given a cheque to the builder on 30th June 2010 of Rs 30 lacs. Now the builder is asking for the service tax on this amount as well. I know service tax is applicable from 1st July 2010 but the cheque has been given to builder on 30th June 2010. I paid service tax on the amount which i paid after 1st july 2010.

Please suggest whether the service tax is applicable on the cheque payment dated 30th June 2010.

Thanks

Ritika

Replies (4)

CS Bijoy

Expert

9764 Points Posted on 13 September 2011

If any payment is made on incomplete construction property than Service tax is required to be paid, but is construction is complete than ST not required.

CA Unnikrishnan Nair N

Chartered Accountant

2114 Points Posted on 14 September 2011

Service tax on residential complex is in force even prior to 01-07-2010. But if the transfer was effected by means of sale agreement, ST could not be levied as it amounts to sale of immovable property. From 01-07-2010 atrnsfer by sale is also liable to service tax if developer receives money prior to completion cetificate.

Madhukar N Hiregange

Chartered Accountant

33545 Points Posted on 15 September 2011

There is absolute confusion in the minds of the tax authorities and when it comes to the tribuanl the actual transaction wouldbe examined. Recently well settled issues such as WC not liable prior to 2007 have been departed from.

The clarification by the revenue shouldbe sought in writing.

Many builders wishing to play safe collect the monies but may or may not pay the same to the dept. This in itslef is an offense.