I paid service tax on my Apartment as part of the schedule for payment. The builder will finish the Apartment only on April 2009. Do you think i should ask for a refund on it? Check the news on Hindu Newspaper saturday edition

Service Tax exemption: some relief to bu.yers
The taxation is not for bu.ying or se.lling of a residential complex, but rendering services in relation to such complex.



When property prices are falling and interest rates on home loans reducing, one more incentive has come from Central Government in the form of exemption of service tax, hitherto applicable on dwelling units purchased from builders.
During 2004-05 when the construction sector was growing by leaps and bounds, with an aim to augment higher revenues, the Central Government introduced service tax on residential complex, under Sec 65 (105) of the Finance Act 1994, which came into effect from June 16, 2005. Inclusion of &#*216;service tax&#*217; for &#*216;**** of residential units&#*217; was highly debatable issue as many leading experts felt that where a ***er makes construction linked payment after entering into agreement to ****, the nature of transaction is not a service but that of a ****. As the service tax was passed on to ***ers, the **** price which was already high was further increased by more than 3-4%.
The Central Board of Excise and Customs clarified that the taxation is not for ***ing or ******* of a residential complex, but rendering services in relation to such complex. If a builder undertakes construction by himself or where no service provider is involved, &#*216;service tax&#*217; will not be levied. The service is taxable only when it is provided by one person to another. Where a contractor provides services to the builder, service tax would be attracted. Thus, when builders engage a contractor, the payment made to such contractor doing a particular job will be covered for service tax purpose. To safeguard interests of small builders, where there was 12 or less number of units in one project, service tax was not applicable.
For standardisation in fixing service tax, 1/3rd **** price was considered for levying service tax, which was assumed to be the portion of **** price, where the builder takes services from others. Hence 1/3rd of applicable service tax of 10.2% (10% service tax and 2% cess) was working out to 3.4% of total **** price during 2005-06. Later on as per Finance Bill 2006, the service tax was increased to 12.36% , making the effective service tax scale to 4.12%.
It was argued before the Authority that since the development of residential complex is a case of self-service it can not be subjected to service tax. The **** agreement is an agreement for outright **** of residential unit and there is no contract of construction between the Builder/Developer and the purchaser; therefore, it cannot be treated as a contract of service.
In view of all relevant factors as stated the Central Board of Excise and Customs took a decision in favour of Builders and Developers and issued a circular dated January 29, 2009, exempting service tax applicable to residential complexes.
The savings on account of service tax is a welcome factor as it saves considerable amount for house purchasers. For example, if you plan to *** a house costing Rs. 25 lakhs from a Builder/Developer, you would be saving a service tax amounting to more than Rs. 1 lakh.
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  • Service tax on apartment

    it seems my original message was edited by buggy robo (computer program)
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  • Refund on Service Tax on Apartment

    Hi Manic,

    Were you able to get your Service Tax refunded? I need clarification whether we need to pay Service Tax and VAT when buying new flat in Chennai.
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