Dear Experts
I have a query regarding applicability of service tax on underconstruction real estate property. Let me first give you a brief background of the case and then I will put my query.
Case: - Let's say person X had booked an underconstruction property on 1st of July 2010 and made 80% payments on the property. However, money receipts were not generated on the service tax payable on the same. Now the builder has infintely delayed the project and has not handed the property even till 1st of April 2014. Upon repeated requests, the builder has finally agreed to cancel the previous booking and instead compensate the money paid for a ready unit (Completion Certificate received). Which means the entie money that was previously paid would now be considered for the new unit, and fresh invoices generated for the same.
Query: - What would be the applicability of service tax on the above transaction. There are two points that come to my mind:
1) Since fresh invoices are being generated for a ready unit, service tax should not be applicable.
2) Since Mr X had paid the money on an underconstruction property, service tax would be applicable. However, the applicable service tax would be 2.575% which was the prevalent service tax during 1st July 2010, and not the current 3.09% rate.
Looking forward to expert guidance.
CAclubindia
