Guys, can any of you tell me 'exactly' what's going on with the service tax issue...?? My builder is asking me to pay approx. 2.6% of the agreement value.
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  • Originally Posted by newone
    Guys, can any of you tell me 'exactly' what's going on with the service tax issue...?? My builder is asking me to pay approx. 2.6% of the agreement value.


    Clarification is as under -

    The Central Government, vide its Notification No.1/2006-ST dated 1.3.2006,
    as amended by Notification No.29/2010-ST dated 22.6.2010, w.e.f. 1.7.2010
    and Notification No.36/2010 dated 28th June, 2010, has brought the
    “Construction of complexes” under the taxable service net under the
    aforesaid Service Tax Act. Accordingly all Residential or Commercial units
    constructed and allotted/sold are now subject to Service Tax at appropriate
    rate. The rate of Service Tax applicable on various Sub-heads under which
    payments are to be made for the Residential/Commercial/Retail Units are
    given below :

    Description | Applicable Service Tax
    ------------------------------------------+------------------------------------------
    Basic Sale Price (BSP) | 2.575 %
    ------------------------------------------+------------------------------------------
    Preferential Location Charge (PLC); | 10.3%
    club membership; maintenance charge; |
    other charges |
    ------------------------------------------+------------------------------------------
    EDC/IDC; IFMS; IBMS; Car Park | Nil




    The aforesaid Service Tax is applicable on all payments made by you on or
    after 1st July 2010. The payments received upto 30th June, 2010 are exempt
    from the aforesaid Service Tax. It may please be noted that the Service Tax
    is linked to the actual date of payment and not linked with the date of
    Payment Request.

    For all Payment Requests raised upto 30th June, 2010 (if not already paid
    before 30.6.2010), you are requested to add the Service Tax amount (as per
    rates specified in Annexure-I) and pay along with the Payment Request
    Amount.


    I hope , the above clarifies yr. issue.
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  • Originally Posted by newone
    Guys, can any of you tell me 'exactly' what's going on with the service tax issue...?? My builder is asking me to pay approx. 2.6% of the agreement value.

    Dear newone,

    The ST of 2.575% on Agreement Value was applicable from 1st July 2010. Any payments made after this notification date will attract ST. Flats with completion certificate are exempted from ST.

    Now as per the latest news MCHI has filed a Writ Petition against Central Service Tax Dept in Bombay High Court for which the Hon Court has given interim stay. At moment everyone is waiting for the final hearing. Till that time you need to pay ST on your payments.
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  • Hi Jitu Sir, when is the next hearing (September - but what date?)
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  • Thanks a lot Manoj and Jitendra :)
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  • High court has put an stay on service tax. Check "PUDHARI" newspaper dated 30th july 2010.
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  • Originally Posted by Venkytalks
    Hi Jitu Sir, when is the next hearing (September - but what date?)

    Dear Venkytalks,
    Didn't get the latest update on the next hearing date. Will provide it asap.
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  • Originally Posted by Jitu_Sir
    Dear newone,
    The ST of 2.575% on Agreement Value was applicable from 1st July 2010. Any payments made after this notification date will attract ST. Flats with completion certificate are exempted from ST.
    Now as per the latest news MCHI has filed a Writ Petition against Central Service Tax Dept in Bombay High Court for which the Hon Court has given interim stay. At moment everyone is waiting for the final hearing. Till that time you need to pay ST on your payments.


    Does this also apply to projects for which registration has been done before 1st July? What if project was booked 2 yrs ago and only the last installment was paid after 1st July?
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  • Originally Posted by lazybone007
    Does this also apply to projects for which registration has been done before 1st July? What if project was booked 2 yrs ago and only the last installment was paid after 1st July?

    Dear lazybone007,
    ST is applicable to flats registered before 1st July 2010 as well. In such case ST of 2.575% shall be applicable on payments for those installments made after the notification date.
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  • The current situation is very confusing. The builders are still demanding 2.575% service-tax even when there is an interim stay by HC. :bab (38):

    BTW, i read somewhere (don't have the link now) that next hearing date is 8th Sept.
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  • Originally Posted by nitesh321
    The current situation is very confusing. The builders are still demanding 2.575% service-tax even when there is an interim stay by HC. :bab (38):

    BTW, i read somewhere (don't have the link now) that next hearing date is 8th Sept.

    Dear nitesh321,
    The interim stay is on 'forceful action of recovery'. Moreover MCHI has filed the writ petition, hence it's applicable to their members only.
    The difference in ST as regards VAT is, it cannot be taken separately and should be taken along with the basic amount showing the bifurcation in the receipt. If ST gets cancelled then we could refund the amount to the respective flat purchaser, but if ST stays (who's chances are more) then it would become difficult to recover ST for the payments made till the final order for the above mentioned reason.
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  • Originally Posted by Jitu_Sir
    Dear nitesh321,
    The interim stay is on 'forceful action of recovery'. Moreover MCHI has filed the writ petition, hence it's applicable to their members only.
    The difference in ST as regards VAT is, it cannot be taken separately and should be taken along with the basic amount showing the bifurcation in the receipt. If ST gets cancelled then we could refund the amount to the respective flat purchaser, but if ST stays (who's chances are more) then it would become difficult to recover ST for the payments made till the final order for the above mentioned reason.


    Well I am bemused :bab (38): if court has indeed added that phrase in stay order. Well forceful or not, recovery of ST by any means is unjust plain and simple.

    I believed the case would compell court to take holistic view of ST as such and something fruitful to come out of it. Hoping that eventually that will happen.

    - Sameer
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  • Originally Posted by Jitu_Sir
    Dear nitesh321,
    The interim stay is on 'forceful action of recovery'. Moreover MCHI has filed the writ petition, hence it's applicable to their members only.
    The difference in ST as regards VAT is, it cannot be taken separately and should be taken along with the basic amount showing the bifurcation in the receipt. If ST gets cancelled then we could refund the amount to the respective flat purchaser, but if ST stays (who's chances are more) then it would become difficult to recover ST for the payments made till the final order for the above mentioned reason.


    Thanks for the info Jitu_Sir. But I am not sure whether it is applicable to members of MCHI only. Moreover, I didn't get a list of builders who are the members of MCHI. I think most of their members are builders of Mumbai.

    Also, once paid it would be difficult for the buyers to get their amount refunded from the builders incase ST is cancelled. Not all builders are like you Jitu_Sir. :)
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  • Originally Posted by nitesh321
    Thanks for the info Jitu_Sir. But I am not sure whether it is applicable to members of MCHI only. Moreover, I didn't get a list of builders who are the members of MCHI. I think most of their members are builders of Mumbai.

    Dear nitesh321,
    Your are right. Most of the members in MCHI are from mumbai.

    Originally Posted by nitesh321
    Also, once paid it would be difficult for the buyers to get their amount refunded from the builders incase ST is cancelled. Not all builders are like you Jitu_Sir. :)

    In that case one can ask for a separate letter/ agreement clause mentioning the refund of ST in case of non-applicability.
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  • Originally Posted by Jitu_Sir
    Dear nitesh321,
    Your are right. Most of the members in MCHI are from mumbai.


    In that case one can ask for a separate letter/ agreement clause mentioning the refund of ST in case of non-applicability.


    Yes, this additional agreement is a MUST. most of the builders in pune are crooks and you will never get your money back.
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  • Originally Posted by Jitu_Sir
    In that case one can ask for a separate letter/ agreement clause mentioning the refund of ST in case of non-applicability.

    Jitu, you can be an exception, but looking at current builders I seriously doubt whether any builder will agree to this.

    Btw, this is an interim stay & doesn't mean that the fin min has reversed the decision. So, it is just postponement of the ST payment as it will have to be paid either today or tomorrow. Btw, what has Credai plans in this regard Jitu?? You must be aware of this being a member of Credai Pune (ex-PBAP).
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