I had a query and it would be great if you could help me.
I have bought a under construction flat. Builder charged me full service tax (w/o abatement) on all my payments.
But now i received a credit note from their side stating that abatement is applicable on floor rise.
But they have given credit note only for the payments made after July 2012. They have a view that there is an amendment in the law from July 2012. But according to my research Notification No. 26/2012- Service Tax just clarifies that abatement is applicable for floor rise. So they should also be giving the credit note for excess service tax paid before July 2012.
It would be really great if you could help me out with my query.
16 October 2012
Also compostion option was available.In the past the deduction under not. 12/2003 was available if 2 contracts existed- agreement of sale + construction contract. If single agreement then under not. 1/2006.
25 July 2024
Certainly! Understanding the applicability of abatement on floor rise charges in service tax (now GST) can be a bit nuanced. Here’s a breakdown to help clarify your situation:
### 1. Abatement on Floor Rise Charges:
- **Before July 2012**: Prior to July 2012, there was no specific provision clarifying the applicability of abatement on floor rise charges. Typically, service tax was charged on the entire amount without abatement, unless specifically exempted or a specific notification provided otherwise.
- **Notification No. 26/2012- Service Tax**: This notification clarified the applicability of abatement on certain services, including construction services. For residential complexes where the cost of land is included in the amount charged from the buyer, 25% abatement was provided, reducing the taxable value to 75% of the gross amount charged. This notification came into effect from July 1, 2012.
### 2. Builder’s Credit Note:
- Your builder provided you a credit note stating that abatement is applicable on floor rise charges for payments made after July 2012. This aligns with the notification where clarity was provided regarding the applicability of abatement from July 2012 onwards.
- **Issue Before July 2012**: If your builder charged you full service tax (without abatement) on payments made before July 2012, technically they should have applied abatement if they were aware or should have reasonably applied it based on subsequent clarifications in the law.
### 3. Your Position:
- Based on your research and understanding, Notification No. 26/2012 clarified the law, making it clear that abatement is applicable. Therefore, your argument that abatement should also apply to payments made before July 2012 seems valid, especially if the builder did not apply abatement and charged you full service tax.
- You can discuss this with your builder and provide them with your understanding of the law. Request them to issue credit notes for the excess service tax paid before July 2012 on floor rise charges, based on the clarification provided by Notification No. 26/2012.
### 4. Next Steps:
- **Communicate with Builder**: Clearly communicate your position to the builder, citing Notification No. 26/2012 and your understanding that abatement should have been applied even before July 2012.
- **Seek Clarification**: If the builder insists on their view, consider seeking clarification from a tax consultant or legal expert specializing in GST or service tax laws. They can provide a legal interpretation and advise on the best course of action, including possible remedies or further steps.
In summary, while your builder issued a credit note for post-July 2012 payments based on the clarification in Notification No. 26/2012, you have a reasonable argument that abatement should have been applied earlier as well. Engaging in a constructive dialogue with your builder, backed by legal advice if necessary, can help resolve the issue effectively.
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