Builder asking for Service Tax after agreement

POSTED BY smonani ON October 2, 2012 4:22 pm COMMENTS (3)

Hi,

Could someone please help me out with the query below?

I bought a flat from a Builder earlier this year. The flat was booked on 12-Dec-2011 with a booking deposit of 1,00,000. The construction / sale agreements were signed on 15-Feb-2012 by providng the down payment amount of 7,00,000, thus completing a down payment of Rs. 8,00,000. When providing the construction agreement, the builder mentioned to give the flat to us in 40 lacks, all inclusive (including registration). The construction agreement also states the value of the flat being 40,00,000 including taxes.

However, I got a notice from the builder before a few days demanding to pay up service tax. As this wasn’t mentioned at the time of agreement, it came as a rude shock. Since I wasn’t told about this earlier, I am trying to check if this is just another way for the builder to extract money or am I really liable to pay this extra amount despite the agreement stating amount including taxes.

Also, he is asking to pay the tax on entire amount excluding VAT & Registration at 12.36%. Am I liable to pay it at the rate of 12.36% or at the rate of 10.3%? Are there any other exemptions that I might get?

Thank you in advance for your help.

Thanks & Regards,

Siddharth

3 replies on this article “Builder asking for Service Tax after agreement”

  1. smonani says:

    Thanks Manish, the city is Bangalore. Would you know what is the % of service tax being charged? From the articles I understand that it started at 10.3% but there was a recent proposition to make it 12.36%/

    Regards,
    Sid

  2. Which city is this ? Because if its MUMBAI or any other city in Maharashtra , then the builder is correct .

    There has been a news – http://www.dnaindia.com/money/column_builders-are-liable-to-collect-service-tax_1647221

    The Mumbai High Court has dismissed a writ petition filed by the Maharashtra Chambers of Housing Industry on behalf of its 800 members challenging the levy of service tax on builders vide its judgment dated January 20, 2012. With the dismissal of the writ petition, builders, developers and promoters will now be liable to collect service tax on all payments received by them post July 1, 2010.

    Manish

    1. smonani says:

      Thanks Manish, the city is Bangalore. Would you know what is the % of service tax being charged? From the articles I understand that it started at 10.3% but there was a recent proposition to make it 12.36%/

      Regards,
      Sid

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