Taxation Of Builders under Maharshtra VAT & Service Tax
subodh
(Querist) 15 July 2008
This query is : Resolved
The Builders who enters into property development agreement with land owners, constructs & enters into agremeent for sale of flat/units(while doing construction) are held liable as "Works Contract" under Maharashtra VAT Act, Is it correct ?
If yes, will they be liable for Service Tax ?
Is the ratio of recent Gohati High Court judjement
MAGUS CONSTRUCTION PVT LTD
Vs
UNION OF INDIA
Is applicable to all ?
Guest
(Expert) 16 July 2008
Yes they will liable for both the taxes. But not on the total turnover. VAT on the part of turnover relating to transfer of property in goods and service tax on other services like labour service etc. whihc is exempth from the VAT.
subodh
(Querist) 19 July 2008
Hi,
Please give your comments considering the Gaohati High Courts judgement of Magnus.
VASANTH D JAGANATH
(Expert) 03 September 2008
Dear Sir,
the liability to pay tax under service tax ariases under the head works contract only when there is service is provided and there should be service provider and service receiver, if the developer has agreed to sell a flat and right to own the property is given only after the completion of the property then no service tax and works contract tax as the intentin of the parteis is to sell a flat which is immovable property. It is because there is no transfer of property in goods is transferred to purchase of falt nor there is service provided therefore not liabile to tax
Court has rightly held in the case of Magus Construction that, even if there is an agreement to sell is entered the wonership is getting transferred only after the registration is being done therfore there will not be any transfer of property or service provided to customer
VASANTH D JAGANATH
(Expert) 03 September 2008
Dear Sir, this is to bring to your kind notice that, recently the Hon'ble Suprement court under Consumer Protection Act, relating to Joint Development of construction of builidng in the case of Faqir Chand Gulati Vs Uppal Agencies Pvt Ltd 2008-TIOL-147-SC-MISC, where it was held that, developer to that extent of owner's share is a service provider and land onwer is service receiver. This judgement may give you a different view in case of service tax liability
