Service Tax Demands of Rs 30,000 Crores to be issued to Builders

Bad News for NDT-Delhi High Court decides to hear paternity suit against Tiwari filed by Rohit Shekhar, who claims that he is biological son of ND Tiwari Haryana Assembly okays Special Economic Zone (Amendment) Bill, 2010, which seeks to provide for refund of stamp duty on registration of land collected from developers of SEZs in the state before notification of SEZ Microsoft loses 106 million dollar Patent verdict Sensex hits 17500 Points in early trading FM says inflation may hit double digit in March Authority for Advance Ruling rules the payments made to ABB Research Ltd., Zurich towards the applicant's share of the cost incurred in respect of R&D activities are not liable to be taxed under the Income Tax Act, 1961 as business income in the absence of permanent establishment in India, having regard to Art.7 of the Tax Treaty- Nor can it be subjected to tax as royalty or fees for technical services under Article 12 of the Treaty-AIT-2010-94-AAR Tariff Value for import of Brass Scrap is 3801 and for poppy seeds 4256-Customs Non-Tariff Notification No. 20 No approval for procurement of service “Rental” of immovable property for office outside the Special Economic Zone/FTWZ can be given-SEZ Instruction No. 49 on Clarifications on FTWZ issues Consolidated list of default authorized operations which can be undertaken by the developer/approved co-developer by default from the date of notification-SEZ Instruction No.50 Himachal Government hikes VAT from 4 per cent to 5 per cent on all items, except edible oils and foodgrains Authority for Advance Ruling rules no capital gains accrued or arose at the time of conversion of partnership firm into a private limited company under Part IX of the Companies Act and therefore, notwithstanding the non-compliance with clause (d) of proviso to Section 47(xiii) of the Income Tax Act, by reason of premature transfer of shares, the said company is not liable to pay capital gains tax-AIT-2010-93-AAR Authority for Advance Ruling rules if the purchasers are non-residents other than the applicant, the applicant is liable to pay tax in India on the amount received by it for the support services rendered through the branch office in India-AIT-2010-92 -AAR Jurisdiction of Dispute Resolution Panel-Income Tax Order No.3 Employment of washing process in the manufacture of agglomerates etc from imported plastic waste and scrap-SEZ Instruction No.48 Haryana Government imposes surcharge ranging from 0.25 per cent to 0.7 per cent on VAT Service Tax Notification No. 17/2010 which exempts the taxable service providing packaged or canned software, intended for single use and packed accordingly amended-Service Tax Notification No.18 Procurement, Import and Export of Prohibited and Restricted Goods by SEZ Units-SEZ Instruction No. 47 Authority for Advance Ruling rules the amounts received/receivable by Technopromexport from NTPC under contract for Offshore supply of all plant and equipment including mandatory spares are not liable to tax in India under the provisions of the Income-tax Act, 1961 and DTAA between India and Russia-AIT-2010-79-AAR

JUDGMENTS

CENTRAL EXCISE

CUSTOMS

exchange rate

SERVICE TAX

INCOME TAX

VAT

FINANCE ACTS

FINANCE BILLS

EOU STPI

SEZ

DGFT

RBI

NTT

RESOURCES

Email | Print

Service Tax Demands of Rs 30,000 Crores to be issued to Builders

AIT News Network

NEW DELHI. Builders and Real Estate Developers who have not been paying service tax under notified taxable service of “construction of residential complex” are in for big trouble and are shortly going to be slapped service tax demands in the range of Rs 30000 Crore after the issue has been settled by High Power Authority for Advance Rulings. Top Builders have already been issued notices by service tax department calling for the figures so that the service tax liability may be worked out based on such figures. Since the service tax on construction of residential complex was levied with effect from June 2005; the liability of Builders to pay service tax is also from the date of levy.

The landmark ruling AIT-2008-127-AAR has been given Justice PV Reddy Chairman of the Authority for Advance Rulings. Justice Reddy is ex-Justice of Supreme Court of India and ex-Chief Justice of High Court.

According to the ruling an Agreement for sale of a constructed residential unit is liable to service tax when booking of the unit is done before or during the construction activity. The applicant had submitted a draft agreement before the Authority wherein the payment terms were as under:

“AGREEMENT OF BOOKING/SALE OF RESIDENTIAL UNIT IN THE SELF-DEVELOPED HOUSING PROJECT-----

3. The BOOKER has agreed to pay/deposit to the BUILDER/PROMOTER OR DEVELOPER the sum of Rs. __________ (Rupees __________ only) against the said constructed residential unit . (hereinafter referred to as "THE CONTRACT AMOUNT"). Such amount shall be paid/deposited by the BOOKER to the BUILDER/PROMOTER OR DEVELOPER as follows: -

Rs. __________ (Rupees __________ only) paid as commitment to purchase the said residential unit.

(ii) Rs. ________________ on--- (iii) Rs. ________________ on---

(iv) Rs. ________________ (v) Rs. ________________

(vi) Rs. ________________ (vii) Rs. ________________

(viii) Rs. ________________ (ix) Rs. ________________

(x) Rs. ________________ (xi) Rs. ________________

(xii) Rs. ________________ (xiii) Rs. ________________

(Against Possession)”

Thus in above situation the payment is not at all linked to stages of construction but even then there is liability to pay service tax.

Though the Ruling has no revenue impact on the applicant as he can recover service tax from his customers as it is his proposed activity; the Developers who have already sold the flats cannot recover service tax from their customers and will be required to pay service tax from their own pocket. Several Consultants who advised their clients against payment of service tax have already reversed their opinion and have now asked them to pay service tax to avoid liability.

Some Consultants who have no exposure and experience of litigation before Supreme Court and Authority for Advance Ruling are criticizing the Applicant. They are more worried about their opinion going wrong and if the logic of the ruling is applied by the Department; the demands will also be confirmed. Such Consultants, whose job is confined to only giving opinion and burying the issues below the carpet, are much more worried about their clients going in the hands of Advocates who will handle the matters up to Supreme Court as the litigation in such matter will obviously go up to Supreme Court.

Related News: