Service Tax to Builder

[saket s]

Hi,

We are paying some amount to a Builder towards completion of a part activity. Flat is not yet handed over to us, which will take a long time for them for complete finishing and handing over to us. The builder is raising a Tax Invoice and claiming Service Tax. Do we need to pay service tax, since flat is under completion and not handed over.

If No, pls provide any notification / circular or corresponding rule.

Thanks

Saket

[Ganeshan Kalyani]

Service tax is applicable on under construction property.

[Ganeshan Kalyani]

In the case of 'Suresh Kumar Bansal Vs Union of India & Ors, Delhi High Court2016 (6) TMI 192 - DELHI HIGH COURT has ruled that service Tax is not applicable on Purchase of flat. But then the same shall not apply for Maharashtra.

[saket s]

Sir, Thank you.

But what if the flat is in Delhi NCR.

[Ganeshan Kalyani]

In that case you may seek the benefit of the above referred case law and ask your builder not to levy service tax.

[Srivatsan Krishnamachari]

If you are paying advance before completion certificate from Local Muncipal/competent authorities, you need to pay Service tax otherwise not required.

Thanks

Srinivas

[Ganeshan Kalyani]

Purchasing flat after completion certificate would amount to purchase. Hence service tax shall not be applicable in that case.

VAT also will not apply because flat is not movable, which is one of condition for applicability of vat.

[Mahir S]

If you outrightly purchasing under construction flat, then there is no service tax thereon.

However, your case appears to be different as much as that the building is under construction and that you shall be getting possession in future. The service tax is required to be paid for such building construction, so if service tax is charged and collected for the part amount paid towards the cost of construction, there is nothing wrong. Even otherwise , the same would have to be paid later on for a whole lumpsum amount.

[saket s]

Thanks all.

AI Summary

Service tax on under-construction property: applies to payments before completion certificate but not to purchase after completion.
Service tax is chargeable on payments for construction of immovable property where possession or a completion certificate has not been issued; advance payments prior to completion certificate attract service tax. Acquisition of a flat after issuance of the completion certificate is treated as a purchase of immovable property and ordinarily does not attract service tax; VAT does not apply to immovable property due to non-movability. Jurisdictional case law may modify applicability in specific territories.