Builder is asking extra service tax – How to deal with it ?

POSTED BY shaiby167 ON November 19, 2014 9:28 am NO COMMENTS


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 10-Jun-2013 with a booking deposit of 1,00,000. The “Agreement of sale of semi-furnished flat” and “Agreement of completion” construction / sale agreements were signed on 10-Jun-2013 by providing the down payment amount which also include the service tax and VAT as per below rate.

S. Tax – 3.09* 40 Lacks
VAT – 1.25* 40 Lacks

Flat was then registered on 29-Jun-2013 and I paid the registration amount and tax towards stamp duty separately. So I have total these 3 documents

Agreement of sale of semi-furnished – 25 Lacs
Agreement of completion – 15 Lacs
Sale Deed – 25 Lacks

*Builder has received  the remaining payments through bank loan which I have availed.

So far so good, now when the flat is almost ready to occupy builder is asking me to pay the extra service tax citing the notification reference “notification Abatement option available under Notification 26/2012-ST dated 20.06.2012”.

As earlier builder has taken service tax @ 3.09% (i.e. 25% of Tax Amount(12.36%)) on amount mentioned on agreement of completion however as per this notification this amount should be charged @ 7.416% ( 60* Tax Rate). So builder is demanding the difference amount from me now.

am I really liable to pay this extra amount despite the fact that signing two agreements and registration of UN-furnished flat was solely builder’s decision and I was no where involved in this?

This was the process what they were following at that time. As this process attracts more service tax now builder has changed this process and signing only one agreement for new customers and trying to collect this extra service tax from old customers who had two agreements.

Please suggest what should I do in this case.

-Shahbaaz A

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