Service Tax Relief for Under Construction Flats by Delhi High Court

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The Delhi High Court has said home buyers cannot be charged service tax on payments made towards purchase of under-construction apartments from builders if the total value of the apartment includes the land value.
However, service tax can still be levied on preferential location charges (PLC) that builders charge from buyers.

The court also said if the developer has already collected service tax, buyers would be refunded the amount with 6% rate of interest by the revenue department of the government of India.

Since the amendment introduced by the Finance Act of 2010, the government charges service tax on buyers of apartments in under-construction pro jects. Service tax is levied only on 25% of the total value of the apartment due to a 75% abatement that is allowed. So at 15% service tax applicable from June 1 this year, the buyer pays service tax of 3.75% on the total value of the apartment.

Vaibhav Gaggar, partner at law firm Gaggar & Associates, said all home buyers will be entitled to seek a refund of service tax component that has been charged. “Developers, in turn, will be entitled to seek a refund from the government,“ he said.He, however, also said this order is likely to be challenged in the Supreme Court by the government.

Builders point out that they pay service tax for all services such as design, contracting, legal and others while constructing a housing project. They get an offset for this amount through the service tax collected from buyers. Now they will have to treat it as a cost and pass it on to home buyers.

“If we are not collecting service tax from buyers, it would mean passing on our service tax burden to buyers,“ said Ashish Sarin, CEO of Gurgaon-based builder Alpha Corp Development.

http://epaperbeta.timesofindia.com/Arti ... 2016007035

Copy of High Court Order

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Vaibhav Gaggar, partner at law firm Gaggar & Associates, said all home buyers will be entitled to seek a refund of service tax component that has been charged. “Developers, in turn, will be entitled to seek a refund from the government,“ he said.He, however, also said this order is likely to be challenged in the Supreme Court by the government.

Does anybody know this order has been challenged in the Supreme Court by the government or not, as more than a month has passed.
RK Jain