I booked a flat in February 2015 and got possession in July 2016. Payments were released stage-wise depending on the completion of work. A separate registration was done for the Undivided Share of land (UDS) and for the flat’s construction.
The builder is now insisting that a service tax be paid for the UDS and the flat’s value. Am I liable to pay the tax? In 2016, the Delhi High Court had ruled that no service tax can be levied in respect of the agreements entered into between buyers and builders for flats (in an under construction building in a housing project). The court, however, noted that service tax could be levied on the amount charged by the builders for preferential location of the flat, saying it was based on the preference of customers and amounted to value addition.
It also noted that service tax cannot be levied on the value of UDS acquired by a buyer of a dwelling unit or on value of goods that were incorporated in the project by a developer. Despite showing this ruling to the builder, he says it is applicable only for buildings in Delhi and not in Tamil Nadu.
Please clarify.
G Arun
Chennai
Please consult your chartered accountant or tax consultant for an opinion in this regard.
