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Service Tax on ready Possession Flat

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Service Tax on ready Possession Flat

Last updated: December 27 2012
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  • Service Tax on ready Possession Flat

    Hi everyone,

    I know this question has been asked previously in a different way, but can someone please clarify it for me.

    I would appreciate if you could clear one of my doubts.

    I purchased a flat in navi mumbai and registered the flat on 29 march 2012, the flat was a ready possession one and the Occupancy certificate was issued on 19/07/2011 (last year). No payment was done before the OC.

    Now the builder is asking for VAT (1%) + service tax (3.09%), I understand the VAT of 1%, but is the builder justified in asking for the service tax, since my flat was in ready possession and the OC was issued in July 2011 itself.

    I am guessing the Occupancy certificate is same as Completion certificate ??

    How do i tackle the builder..
    Thanks in advance..
  • #2

    #2

    Re : Service Tax on ready Possession Flat

    i dont think u have any option but to pay the tax..

    Comment

    • #3

      #3

      Re : Service Tax on ready Possession Flat

      Originally posted by junaid123 View Post
      Hi everyone,

      I know this question has been asked previously in a different way, but can someone please clarify it for me.

      I would appreciate if you could clear one of my doubts.

      I purchased a flat in navi mumbai and registered the flat on 29 march 2012, the flat was a ready possession one and the Occupancy certificate was issued on 19/07/2011 (last year). No payment was done before the OC.

      Now the builder is asking for VAT (1%) + service tax (3.09%), I understand the VAT of 1%, but is the builder justified in asking for the service tax, since my flat was in ready possession and the OC was issued in July 2011 itself.

      I am guessing the Occupancy certificate is same as Completion certificate ??

      How do i tackle the builder..
      Thanks in advance..
      1 Please explain how did you purchase and registered the flat in March 2011 if no payment was done till getting OC in July 2011. The builder will not allow registration unless you pay him some amount.

      2 In case you have done some payments in March 2011 during registration you may be bound to pay SER TAX.

      3 A perfectly clear case would be doing both registration(purchase) and entire payment after getting Completion Certificate.

      4 There are slight differences on OC and CC which are as under

      Building Completion Certificate: This certificate is issued by Municipal Authorities showing whether the building complies with the rules of building height, distance from road, and whether it is built according to approved plans and is ready for habitation.



      Occupation Certificate: This certificate is issued when the building is ready for occupation after water, sewage and electrical connections are complete. An original copy of the Occupation Certificate by the Municipal Corporation of the locality is mandatory. It is vital in the sense that this document confirms the possession to the buyer legally; otherwise a mere handing over of the possession will stand null and void, in case a dispute arises

      Naturally it seems OC will be obtained after CC.

      Comment

      • #4

        #4

        Re : Service Tax on ready Possession Flat

        Hi,

        I did not pay anything to the builder before the OC was issued.
        Infact i went to the see the flat itself after the OC was issued.

        I made the initial payment in February 2012 and we went for the registration of the agreement in the next month ie; March 2012 and the OC was issued in July 2011.

        But the builder called me a few days before and asked to pay 3.09% service tax, how do i handle this ??

        Comment

        • #5

          #5

          Re : Service Tax on ready Possession Flat

          Originally posted by junaid123 View Post
          Hi,

          I did not pay anything to the builder before the OC was issued.
          Infact i went to the see the flat itself after the OC was issued.

          I made the initial payment in February 2012 and we went for the registration of the agreement in the next month ie; March 2012 and the OC was issued in July 2011.

          But the builder called me a few days before and asked to pay 3.09% service tax, how do i handle this ??
          You are clearly not liable to pay service tax to builder.Builder in this case is wrong in making such demand.

          Please convince the builder accordingly ,if not accepted by builder , take CAs opinion in writing and show to builder along with the ST rules for RE.

          Builders/developers are held responsible to pay service tax on payment towards sale consideration received before the grant of completion certificate by the competent authorities for such flats/units.

          In other words if a builder/ developer receives the Entire Sale consideration after Issue of Completion Certificate then his NOT liable to pay ST since it will be as sale of product and there is no service provided by the builder to the buyer.

          Comment

          • #6

            #6

            Re : Service Tax on ready Possession Flat

            Thank you for the guidance really appreciate it.

            I will keep you guys updated and let you know In case i have to approach a CA.

            Thanks again.

            Comment

            • #7

              #7

              Re : Service Tax on ready Possession Flat

              Dear junaid

              As per service tax rules, service tax is not applicable only if the builder has obtained a completion certificate from the local authority.

              In many parts of the country there is no system of completion certificate . The local authority issues only occupation certificate which is regarded as the final certificate.

              However in Mumbai MCGM issues a completion certificate after the occupation certificate though many builders donot obtain the same .

              So technically the builder can charge u the service tax.

              U suggest u check the agreement . In Case it's not mentioned in the agreement u may be saved .

              Comment

              • #8

                #8

                Re : Service Tax on ready Possession Flat

                What specifically do i need to check in the agreement ?

                Comment

                • #9

                  #9

                  Re : Service Tax on ready Possession Flat

                  Check whether there is clause if the taxes are to be borne by the purchaser.

                  Comment

                  • #10

                    #10

                    Re : Service Tax on ready Possession Flat

                    After the tax issues created by Govt. that clause is now part of all Flat agreements and its there is mine agreement too.

                    Are you sure the Completion certificate is issued after the OC ?? is is not logical to issue the Occupancy certificate after the work has completed ??

                    Comment

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