Service tax on builder security deposits excluded where amounts were held as trustee or pure agent for flat owners.

Service tax was held not payable on security deposits received by a builder from flat owners, because the amount was not received towards any service provided or to be provided. It was treated as a security deposit held in the nature of a pure agent or trustee for the flat owners, to be transferred to the society or association after completion and handover of the flats, and therefore outside the service tax levy.

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Issues: Whether service tax was payable on the amount received as security deposit by the builder from flat owners.

Analysis: The amount was found to have been received not towards any service provided or to be provided by the builder. It was treated as a security deposit held in the nature of a pure agent and/or trustee for the flat owners, to be transferred to the society or association after completion and handover of the flats.

Conclusion: The amount was not liable to service tax.

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