Are prospective Home buyers exempted from ServTax?

This query is : Resolved

AOJSM (Querist)
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02 January 2009 hello all,

My sister (living abroad) bought a villa for 50lacs in hyderabad. The builder is asking her to pay VAT(@4%)and ServTax(@4.12%) on the "Cost of Construction=41 lacs" component. Is this correct???

So the point is, I was reading the site/forum and found few articles relating to the exemption given to homebuyers in terms of ServTax by the Govt of India. Is this still applicable as on Jan 2009, I quote the following for easy reference:

1. "https://www.caclubindia.com/news/2007/9/service_tax_relief_for_home_buyers.asp"

2. "https://www.caclubindia.com/news/2007/9/home_buyers_get_service_tax_waiver_.asp"

From these above articles I understand that she doesn't have to pay ServTax as demanded by the builder.

Please enlighten me on the issue and dont hesitate to ask me if u need any clarifications from my end.

Also can anybody tell the Circular Number issued on 23Aug,2007 regarding the same.So that it would be handy to have a printout and show the builder if needed.

I found one link pertaining to the above, i really dont know if it matters to the case above or not. Anyways all u learned people go thru and let me know where is it mentioned??

http://www.servicetax.gov.in/circular/st-circular07/st_circ_96-2k7.htm

Sai

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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13 May 2009 No, you need not to pay service tax. Pls refer recent circular issued by CBEC (Cr. No. 108/02/2009-ST, dated 29th January 2009

AOJSM

AOJSM (Querist)
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14 May 2009 hello sir,

Thanks very much for the reply...I have gone thru the circular CBEC (Cr. No. 108/02/2009-ST), dated 29th January 2009.

As a layman I have read the circular umpteen times, but I feel there is so much ambiguity in the circular, why can't the commissioner/dept give a clear cut demarcation whether the customer has to pay the Service Tax or Not, as simple as that instead of mentioning all those clauses which is creating confusion once again. In the 3rd point the last 3 lines which are raising doubts, I quote "However, in both these situations, if service of any person like contractor,designer or a similar service provider are received, then such a person would be liable to pay ST".

Now why should the circular contain such ambiguous statements making room for the other party/builder/service provider to contest the circular notice. Though i'm not an authority to comment, but its just a after thought perusing the document. If you have time then I can explain the scenario.

Thanks once again for throwing some light on an already dark area.

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CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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19 May 2009 Look the circular may not be as you desired (why can't the commissioner/dept give a clear cut demarcation whether the customer has to pay the Service Tax or Not, as simple as that). Further, there is no service provider and recipient relationship between you and the builder.

AOJSM

AOJSM (Querist)
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31 October 2010 sorry for the delayed reply...due to unforeseen circumstances (untimely death of a parent) made this issue take a backseat.

Yes I agree that it may not be as desired by me, but the circular is in generalized cases. What i'm trying to say was the department to give a directive as to whether a Recipient has to pay ST or not. As simple as that.

You said "Further, there is no service provider and recipient relationship between you and the builder." Can you explain & elaborate by citing example for my better understanding, please?

I want to know if Service Provider and Recipient relationship exists under the following conditions:
1. I have signed a agreement of construction with him, does that constitute to be of service provider and recipient relationship in this scenario??
2. Its a gated community with 25 houses.
3. Sale Deed is registered as a semi constructed house.