|Service tax on under construction property|
Service tax on under construction property
Law & its interpretation keep on changing day in & day out. There are number of issues on which controversy & confusion prevails in the law. One such issue is with regard to levy of service tax by the builder of under-construction. The issue is summarized hereunder so as to enable the buyer & builder to have an idea about the recent development on the applicability of service tax.
3. Controversy has emerged after the recent Delhi High Delhi High Court judgement in which petition was filed by a flat buyer who had an agreement with builder to buy flat in housing project.
4. Delhi high court has given a remarkable judgement.
5. ’The High Court held that “No service tax could be charged on sale of flats under construction on the basis that there is no mechanism to find out the actual value of service. There is no method prescribed under the Act or Rules for determining the value of service involved in contract, grant of abatement through notification cannot overcome the provision to find the value of service”.
6. The court further held that charges collected for preferential location charges are subject to service tax as it is held as ‘service’ as per the sec 65(105) zzzzu of Finance Act 1994.
7. The above judgment is limited to jurisdiction of Delhi High Court. The central government can challenge the judgment in Supreme Court, if Supreme Court decides in favor of Delhi high court judgement, then it will be applicable to all states i.e., throughout India.