Service Tax on Under Construction Property

[hanitahuja]

Hi GWFA members,

I am curious to know if all of you are paying Service Tax on all of your payments made after June 2010.
Has your builder charged the service tax or not.

We , SRS Pearl Independent Floor members are paying Service Tax on all our payments currently wef June 2010.

Please respond.

[sendtomanish]

I guess every builder would be charging.For SRS Residency we have paid the S.T.

[Vicky0909]

Omaxe is also charging the Service Tax.

[webmaster]

Some articles on the internet

http://www.raagvamdatt.com/budget-2010- ... ents-flats

Maybe some our members from finance can throw some more light.

[JAPNOOR]

shall check and confirm

[Pramod Agarwal]

Hi GFWA Members ,

If Builders would have given us the possession in time , then service tax would have not come in to the picture. Government is not asking service tax from those , who have already taken the possession and paid fully to the builders.
In our case ,due to delay in possession ,Its a problem of Builders and Builder should bear the burden of service tax.

Rgds - P K Agarwal

[yadav_ajay]

As Promod Pointed that For Completed Projects where Possession taken, will not come under Service tax.

And service Tax for under Construction property is like this :

2.575% on BSP, EDC, IDC, Electrice sub station charges.
10.3% on PLC
Nil on Parking.

This applies on all payments made after 1st July'2010.

If you are making any payment now, then Service tax is applicable on that Payment as per above structure.

regards

Ajay Yadav

[nl_tuteja]

Dear Mr. Jayanta,

Service Tax on Construction of Residential Complex has its advent from Supreme Court's judgement in Raheja Builders' case during 2005 wherein the developer was treated as 'Works Contractor' executing housing project on behalf of proposed buyers.

The levy was opposed by various forums during past till introduction of budget 2010-11 proposals, overrideing all previous judgements. The new provisions were effective from 1.7.2010.

Service Tax is payable @ 10.3% (service tax @ 10% + education cess & higher education cess @ 3% of 10%) on billing amount of developer (in form of periodical demand notices for payments). As per the amended provisions, rebate is allowable @ 75% of billings for Basic Selling Price (BSP). Accordingly, Service Tax is payable @ 2.575% on BSP, 10.3% on PLC & Other charges and No Service Tax on EDC & IDC.

Regards,
Nand Tuteja

[yadav_ajay]

Dear Nand Tuteja,

Service Tax also applicable on EDC and IDC.
Pls refer notification 29/2010 Service tax Act dated 22.6.2010.
Its states that :
" Insertion of new clause zzzzu in section 65(105) i.e. levying of Service Tax (ST) on the amount collected towards preferential location or internal / external development. Such as services provided by a builder to a buyer in providing preferential location or external or internal development of complexes on extra charges"

details attached herewith for ready reference.

regards
Ajay yadav

[nl_tuteja]

Dear Mr. Ajay,

I appreciate your interest in the subject.
There have been clarifications from the Joint Secretary (Tax Research Unit-II) on 26/2/2010 regarding various matters including service tax on Construction of Residential Complex. According to the clarifications, EDC/IDC Charges paid to the State Government are exempt from Service Tax. Apart from the above, Charges for Parking Space are also exempt from Service Tax. It is worth noting, if builder is paying Service Tax on any part of EDC/IDC collected from us, the same will prove the gap between the EDC/IDC Charges demanded by the State Government & Collected by the builder

Relevant Portion of the clarifications are reproduced for ready ref:

"Government of India, Ministry of Finance, Department of revenue,Tax Research Unit
Gautam Bhattacharya, Joint Secretary (Tax Research Unit-II), Telephone No. 011-23093027 Fax No. 011-23093037
e-mail. g.bhattacharya@nic.in
D.O.F. No.334/1/2010-TRU, New Delhi, dated 26th February 2010

Dear Madam/Sir,
Subject: Changes proposed in service tax law and procedure in Union Budget 2010-11 – regarding
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Annexure- A
[to JS (TRU-II) D.O.]
Scope and the background of the new services included in the List of Taxable
.........................................................................................................................................8.2 Since these charges are in the nature of service provided by the builder to the buyer of the property over and above the construction service, such charges are being brought under the new service. Charges for providing parking space have been specifically excluded from the scope of this service. Development charges, to the extent they are paid to State Government or local bodies, will be would be excluded from the taxable value levy. Further, any service provided by Resident Welfare Associations or Cooperative Group Housing Societies consisting of residents/owners as their members would not be taxable under this service."

Regards,
Nand Tuteja

[yadav_ajay]

But Builders are charging the Service tax on EDC and IDC amount also.
I received demand letter in which builder asked for Service tax on EDC and IDC.

[nl_tuteja]

Dear Mr. Ajay Yadav,

May I request to refer my last post.
Ministry of Finance itself has clarified Service Tax on EDC /IDC charges, to the extent paid to the State Government or Local Bodies will be exempt from Service Tax. Relevant extracts of the clarification are reporduced again:

8.2 Since................... Charges for providing parking space have been specifically excluded from the scope of this service. Development charges, to the extent they are paid to State Government or local bodies, will be would be excluded from the taxable value levy. .........................................."

In case, builders are charging Service Tax on EDC/IDC Charges, the same is a proof against builders that they are collecting either higher amount of EDC/IDC Charges from us or they have received no demand from Authorities but recoveries our hard earned money. We should ask builders to clarify:

1. EDC/IDC Demand Letter received from Authorities
2. Basis for collecting the charges from customers
3. Amounts deposited with the Authorities (the same can be also verified from their Service Tax Returns).


Regards,
Nand Tuteja

[kbmalhotra]

My response to the builder on getting the intimation to pay the Service Tax-


In reference to your letter, following clarifications may kindly be made before the payment of service tax is done by us.
1. What is the ratio between material and labour over which the service tax has been calculated by you?
2. What is the percentage of service tax and how have you calculated the tax.
3. How much amount has been demanded by tax department and how have you distributed the tax amongst buyers.
4. You had informed a few days back that you had moved court against imposition of service tax.
5. What is the out come. Kindly provide the copy of court orders.
6. You were supposed to deliver the flats in 2010 but you failed. Had you delivered the flat in time this service tax would not have been imposed because Govt. has imposed service tax during 2010 only.
7. Why the customers are being punished for no fault of theirs.
8. Now when do you intend to hand over the flats to customers?
9. As per agreement you are supposed to pay penality for delay in handing over the flat. Why are you silent on that?
10. Kindly give reply in detail at an earliest so that the amount can be paid.
11. Please note that my whole provident fund received on my retirement has been spent on this flat. I am under heavy stress.
12. I visited site one year back ang again a few days back. There was no progress what so ever during one year's time.
13. The work has been stopped after you have collected more than 90% of amount from us.

A few lines from your side to console us will be highly appreciated.


Other members may please comment on this issue.


Regards,


Malhotra

[Pankaj Rawat]

Please refer below site for details. It clarify the Service Tax issue.

http://www.cbec.gov.in/budget1011/do-js-tru2.pdf

8. Special services provided by builder etc. to the prospective buyers such as
providing preferential location or external or internal development of
complexes on extra charges.
8.1 Construction of commercial or industrial structures was brought under
service tax net in 2004 while construction of residential complexes became a
taxable service in 2005. The scope of the existing services includes construction,
completion and finishing, repairs, alterations, renovation or restoration of
complexes. It has been reported that in addition to these activities, the builders of
residential or commercial complexes provide other facilities and charge separately
for them and these charges do not form part of the taxable value for charging tax
on construction. These facilities include,-
(a) prime/preferential location charges for allotting a flat/commercial space
according to the choice of the buyer (i.e. Direction- sea facing, park facing,
corner flat; Floor- first floor, top floor, Vastu- having the bed room in a
particular direction; Number- lucky numbers);
(b) internal or external development charges which are collected for
developing/maintaining parks, laying of sewerage and water pipelines,
providing access roads and common lighting etc; (c) fire-fighting installation
charges; and (d) power back up charges etc.
12
8.2 Since these charges are in the nature of service provided by the builder to
the buyer of the property over and above the construction service, such charges are
being brought under the new service. Charges for providing parking space have
been specifically excluded from the scope of this service. Development charges, to
the extent they are paid to State Government or local bodies, will be would be
excluded from the taxable value levy. Further, any service provided by Resident
Welfare Associations or Cooperative Group Housing Societies consisting of
residents/owners as their members would not be taxable under this service.

Thanks & Regards
Pankaj Rawat

Dear Mr. Ajay Yadav,

May I request to refer my last post.
Ministry of Finance itself has clarified Service Tax on EDC /IDC charges, to the extent paid to the State Government or Local Bodies will be exempt from Service Tax. Relevant extracts of the clarification are reporduced again:

8.2 Since................... Charges for providing parking space have been specifically excluded from the scope of this service. Development charges, to the extent they are paid to State Government or local bodies, will be would be excluded from the taxable value levy. .........................................."

In case, builders are charging Service Tax on EDC/IDC Charges, the same is a proof against builders that they are collecting either higher amount of EDC/IDC Charges from us or they have received no demand from Authorities but recoveries our hard earned money. We should ask builders to clarify:

1. EDC/IDC Demand Letter received from Authorities
2. Basis for collecting the charges from customers
3. Amounts deposited with the Authorities (the same can be also verified from their Service Tax Returns).


Regards,
Nand Tuteja

[pkgupta78]

Hi core memebers,
In last week, I got a letter from Ansal Crown Heigh, Sec-80, Fariabad. I noticed that they have charged service tax @3.09%. Is service tax applicable to EDC/IDC charges. Please advise.

Also, does anybody has EDC/IDC calculation seet about the same. If so then can you please share?

Thanks and Regards,
Pramod Kumar