Service tax on flat.
PG Mathews
(Querist) 13 January 2014
This query is : Resolved
We have purchased a flat in Pune in 2012. The agreement is dated Feb 29,2012. The building was completed and ready for occupation. We obtained loan from HDFC bank and made the full payment to the builder at the time of agreement. Stamp duty was duly paid and the agreement was registered. The bank while sanctioning the loan must have verified all the required documents and only then passed the loan. The builder handed over the completion certificate dated Mar 07,2012 in Jun 2012.
Now last month ie. Dec 2013 he has asked us to pay the service tax.
Kindly advise us as to whether we are liable to pay the service tax as we had made the full payment at the time of purchase and surely the bank had also verified all the statutory documents including the completion certificate. In case the builder insists, what is the remedy open to us. Please let us know where we stand on this issue.
Thanks in anticipation.
P.G.Mathews,
Pune.
S.QAISAR ALI ADV.
(Expert) 13 January 2014
pl, study the deal agreement held with u and the builder and then act upon accordingly.
Rajendra K Goyal
(Expert) 14 January 2014
Circular No. 151 /2 /2012-ST dated 10th February, 2012
(A) Taxability of the construction service:
(ii) For the period after 01/07/2010, construction service provided by the builder/developer is taxable in case any part of the payment/development rights of the land was received by the builder/ developer before the issuance of completion certificate and the service tax would be required to be paid by builder/developers even for the flats given to the land owner.
Please consult your tax consultant and show him all your documents in view of the above.
PG Mathews
(Querist) 06 February 2014
I have not yet received a clear opinion on this matter.
Anirudh
(Expert) 06 February 2014
The answer is quite simple and very clear.
If the Completion Certificate was obtained first and the sale of the flat was done later on, then in that case, service tax is not payable. This is because, once a completion certificate was given, it means the flat is ready and complete in all respects. In such condition, when the Flat is sold, there is no service involved. It is the clear case of sale of immovable property.
However, if the agreement to purchase the flat takes place prior to issuance of completion certificate, and if the money towards the flat is also paid, then service tax is payable. This is because, prior to the receipt of completion certificate, there is no flat available and the same is being constructed for the prospective buyer. As there is no ready flat available and the same is being constructed and given to the buyer, there is service involved and hence service tax is payable.
PG Mathews
(Querist) 21 February 2014
We obtained the possession letter dated prior to the completion certificate date.
Does that change anything. The issuance of possession letter implies that the flat is ready for occupation and the builder must have obtained the completion certificate.
To summarise:
Agreement dt.10.02.2012
Possession letter dt.19.02.2012
Completion Certificate dt.09.03.2012.
Please guide.
Thanks and Regards.
Anirudh
(Expert) 21 February 2014
You entered into an agreement for purchase of a Flat prior to issuance of Completion Certificate. That means, when you entered into the agreement, the flat was still under construction. Therefore, service tax is payable. If the Agreement to purchase had been entered into or if you had purchased the flat in question after the date of completion certificate, what you are getting is a ready built flat (not a flat under construction) and therefore it is a sale of immovable property and service tax is not attracted. Whereas in the case of flat which is under construction, there is construction service and hence service tax is attracted in your case.
ajay sethi
(Expert) 21 February 2014
agree with MR anirudh
PG Mathews
(Querist) 15 March 2014
Does the possession letter issued by the builder has any standing in the matter.
PG Mathews
(Querist) 05 April 2014
When can the builder issue possession letter. Is it before or after obtaining the completion certificate.
PG Mathews
(Querist) 17 April 2014
Nobody is answering my question. Pls answer.
T. Kalaiselvan, Advocate
(Expert) 14 January 2014
