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Joe (PL)     22 March 2011

Service tax on Residential Apartment

I live in Chennai. I happened to see an article on "The Service tax puzzle" in The Hindu - Property Plus, published on "June-19-2010". Attached is the scanned copy of the article.

I have some queries on this. Could anyone please answer my queries?

I had bought an apartment in Chennai on Aug-2010 by registering the UDS of 445 sqft and the construction is going on. My first payment started on Sep-2010.
I got a letter from the builder on 27-Feb-2011, that I have to pay the service tax.

My apartment value is 19,10,000 Lakhs (Including All). There are totally 142 apartments. But according to the article attached, if the property value is less than 20 Lakhs, there is no service tax. So in my case,If I am not wrong ,I don't have to pay the service tax. Then I have no idea, why the builder is asking me to pay the service tax.

Could you please advise me how to proceed this case further?

Also I would like to know on what basis the Service tax is calculated.
Thanking you,



 4 Replies

CA VK Dwivedi (Job)     22 March 2011

Dear Joe,

Service tax on Residential building under construction on whihc account?

Refer circular no. 2 issued by CBEC on 29 Jan'2009. Wherein in it was clearly mentioned that wher the builder has entered into agreement to sell with the buyer and property is under construciton and later on when Sale deed is executed when Construction is completed and buyer paid the amount it is case of SALE  and not be subject to Service Tax.

In some of the cases Builder are collecting amount on account of Service Tax but are not depositing it withthe governement also in some cases the builders are not clear on this whether to collect or not thye usually collect it from the buyers to be at safer side.

VK Dwivedi

1 Like

Joe (PL)     23 March 2011

Dear Dwivedi,

Thanks a lot for the quick response. So you mean to say that there is no need to pay the service tax. Could you please eloborate more on this? Also please share your thoughts on the PDF(11_11_service_tax_puzzle.pdf ) that i had attached in the forum.

Thanks again.



CA VK Dwivedi (Job)     23 March 2011

Dear Joe,

Am not able to read the attached pdf as it is in potrait format however i attacehd the circular which referred earlier. Relevant is the the Para 3 of this circular.

Cheers, VK Dwivedi

Attached File : 14 14 circular no circular no 108 02 2009 st dwivedi.pdf downloaded: 559 times

Vinay (Engineer)     13 August 2011

Dear Dwivedi,

   My case goes like this - I am looking for an legal opinion/advice on getting refund of service tax which has been charged while purchasing a flat in Bangalore( in 2007).The builer has specifically stated the service tax head both in the sale agreement and sale deed.A letter mentioning the amount has also been issued.This claim of service tax refund is basing on the " Circular No. 108/02/2009 – ST "  (as stated above) issued by Govt of India on 29th Jan to clarify all the questions related to service tax. Further to this, there are 12 buyers in total who has paid service tax in a similar way. Therefore request you to let me know whether we hold good to get a refund or not. If yes, please give the next steps as well

Thanks & Regards

Attached File : 131334 202034 4 st circular no.doc downloaded: 291 times

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