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Service Tax HC Relief For Home Buyers amp Developers

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Service Tax HC Relief For Home Buyers amp Developers

Last updated: May 31 2011
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  • #11

    #11

    Re : Service Tax HC Relief For Home Buyers amp Developers

    Valid point..

    Though any update on the hearing from court. it was supposed to be 3 Aug.

    Regards
    Inder.

    Originally posted by lmfrz View Post
    I think the govt has done a good thing by imposing a service tax on under-construction buildings. The point here is that builders will find it difficult to get funds from investors. (an investor will be vary of doling out service tax as he wants the max out of his investment).
    MCHI is fighting the case only 'coz they are finding it difficult to get fund. It's not at all out of their concern for the end consumers.
    I think, service tax will help me and you... by taking the investors away... and by reducing the prices in the long run.

    Comment

    • #12

      #12

      Re : Service Tax HC Relief For Home Buyers amp Developers

      I respect your view but frankly I think the logic does not hold water. Investors who make upto 100% return on the properties that buy will not really worry too much about the 2.5% levy. They will anyway recover it from the next user. Even as a end use I will always calculate the cost of my property including the service levy which means that if and when I put it on the market I will factor in for that amount. It's just like saying people who pay a premium for floor rise will consider tht point and pass on the premium they paid (and much more) to the next buyer. Same is the case with service tax.

      I however agree that MCHI is anyway in the mix for its own good though its desperately trying to play guardian angel. In a way its good that atleast some one is protesting this order because you and me are too busy buried in our office work and other issues anyways..This the unfortunate and true picture in my opinion

      Originally posted by lmfrz View Post
      I think the govt has done a good thing by imposing a service tax on under-construction buildings. The point here is that builders will find it difficult to get funds from investors. (an investor will be vary of doling out service tax as he wants the max out of his investment).
      MCHI is fighting the case only 'coz they are finding it difficult to get fund. It's not at all out of their concern for the end consumers.
      I think, service tax will help me and you... by taking the investors away... and by reducing the prices in the long run.

      Comment

      • #13

        #13

        Re : Service Tax HC Relief For Home Buyers amp Developers

        Originally posted by lmfrz View Post
        I think the govt has done a good thing by imposing a service tax on under-construction buildings. The point here is that builders will find it difficult to get funds from investors. (an investor will be vary of doling out service tax as he wants the max out of his investment).
        MCHI is fighting the case only 'coz they are finding it difficult to get fund. It's not at all out of their concern for the end consumers.
        I think, service tax will help me and you... by taking the investors away... and by reducing the prices in the long run.

        Somehow don't agree with this concept. However, this gave me another thought about Capital Gains taxation. Now if we are selling flat, say after 5 years, what would be my cost of acquisition? it can't be total purchase cost of flat, since 25% is constituting "services received", which should not be capitalized.

        Any thoughts?

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        • #14

          #14

          Re : Service Tax HC Relief For Home Buyers amp Developers

          --
          Ravi Ahuja, Executive Director, Development Services, Cushman & Wakefield, India also says, ''It will be detrimental for the low and mid-segment residential sector which is already facing the heat of high home loan interest rates.''


          He points out, "As per this law, purchase in a new building is exempted from service tax once it has received completion certificate. This may result in a drop in pre-commitments from investors and affordable housing buyers resulting in project finance concerns for developers."


          Ahuja points out that as most developers finance their projects through pre-commitments which are done in the early stage of construction, the new tax levy will force many endusers as well as investors to relook at their budgets as well as cash flows.
          --


          I think 2.5% is too less a price to pay to squeeze these builders out of fund.
          In the long term it will help by making real estate not so attractive for investment.

          MCHI is doing the litigation for its own good. In retrospect, I feel the 30 - 40% price hike from Feb '10 to June '10 can be attributed to the imposition of this tax. And many builders made a killijng out of fear of service tax of the end consumers. I have seen a few builders asking to book before June '10 to avoid the service tax.

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          • #15

            #15

            Re : Service Tax HC Relief For Home Buyers amp Developers

            The latest I heard on the service tax from one of the developers is that the court has adjourned the matter until 23rd Sep hence no service tax is payable at the moment. However some developers are taking an undertaking from buyers to cover themselves incase the judgement goes against them.. Just an update..

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            • #16

              #16

              Re : Service Tax HC Relief For Home Buyers amp Developers

              Friends,
              Any update on this.... Who is the winner?
              One of my relative booked an under construction flat in Ghazaiabd, in Sep 2009. He is in CLP plan. Now builder is asking service tax on the remaining amount after Jul 2010.

              Is it a valid demand from the builders.

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              • #17

                #17

                Re : Service Tax HC Relief For Home Buyers amp Developers

                Service tax

                Hi, I would like to know about service tax on under construction Flat/Property? As of my knowledge HC grants interim stay on Service Tax levy on buildings under construction. Is it right? still stay is there on Service Tax or We have to pay? Please do let me know.

                Thanks.

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                • #18

                  #18

                  Re : Service Tax HC Relief For Home Buyers amp Developers

                  service tax

                  HI,
                  What is current status of the service tax? is it applicable? if Yes, then from which date?

                  regards,
                  Manohar

                  Comment

                  • #19

                    #19

                    Re : Service Tax HC Relief For Home Buyers amp Developers

                    There is another thread where Sharpj has given detailed explanation. Search for thread with key words service tax. You will get details there.

                    Comment

                    • #20

                      #20

                      Re : Service Tax HC Relief For Home Buyers amp Developers

                      Hi Pankaj,

                      Your post talk about the interim stay by high court on ST. But the last paragraph of your post mentions "Flat buyers now have to pay approximately 2.5% as...". Confusing?!?!

                      Regards,
                      MechEngineer

                      Originally posted by pankajlaws View Post
                      MUMBAI: In a temporary relief to home buyers and developers, the Bombay high court has granted interim stay on service tax on under-construction buildings, which was challenged by the Maharashtra Chamber of Housing Industry (MCHI), an umbrella organisation of 500 developers. The matter is posted for hearing on August 3.

                      Admitting the petition last week, a division bench of Justices V C Daga and S J Kathawala granted interim stay until further hearing. The MCHI and others challenged the constitutional validity of the Finance Act 2010, which sought to introduce the concept of service tax on under-construction buildings. But the MCHI contended that the sale of a unit, as per the settled laws dealing with transfer of property, could not be deemed a service.

                      "Sale by the builder should not be treated as a service, as service tax is levied ultimately on the property," said the MCHI. Senior advocate Rafique Dada appeared on behalf of M/s Parimal K Shroff & Company for the MCHI in the court.

                      In its interim order, the HC stated, "No coercive steps shall be taken against the petitioner for the recovery of service tax in relation to the provisions in question... but assessment may proceed in accordance with the law." This allows the government to carry on service-tax assessment.

                      MCHI president Sunil Mantri expressed satisfaction over the court's ruling which he said was "in the interest of the common man". "Any such levy will increase the cost of the flat and ultimately the buyer will have to bear the brunt," Mantri said.

                      Flat buyers now have to pay approximately 2.5% as service tax on the total value of their flat. "If the value of a flat is shown Rs 1 crore in the agreement, the home buyer will have to shell out an additional Rs 2.5 lakh as service tax," he said.
                      Regards,
                      MechEngineer

                      Comment

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