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Input credit of Service Tax paid on purchase of property

15 February 2011

hey hi guys I have some querry of service tax in case of real estate developers.

As in AY 10-11 new notification was inserted and service tax is also levied on deemed construction.

Now in this case

1) Whos is liable to pay service tax ? is the builder is liable to pay from his pocket or he has to recover from the buyer of the property.

2) If service tax is recoverd from the buyer no can he availed the input credit of that.

Suppose Mr. A purchase Business Premises from builder Mr. B and B has recoverd service tax from A

now can Mr. A take the credit of servcie tax as input credit.

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6 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 15 February 2011

if the property is the the registered business address and service providing place then YES, but its impossible as the service tax paid on properties can not get service tax number before the registration at the business place in question,

so its inadmissible.

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CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 16 February 2011

In respect of commecial construction, the builder is liable to service tax and he can recover the tax from the buyer. If the buyer is using the premises for providing taxable service or using the same as factory for manufacture of excisable goods , cenvat credit can be availed. However, there is a CBEC circular which clarifies that cenvat credit in rspect of works cotract service is inadmissible . This clarfication is inconsistant with the statute and litigations are pending on this question.

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Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 16 February 2011

The credit for any eligible input service cannot be denied as long as the same is used in or in relation to manufacture or clearacen of goods or used for business or used for provding taxable services.

Circulars are not binding in law if they are not in line/ accordacne with the law. They cannot lay down any new law.

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PRADEEP CHAND SHARMA (Accounts Officer) (141 Points)
Replied 16 February 2011

1. Builder is liable to pay service tax

2. Builder can recovered srvice tax from buyer.

3. Buyer can take the cenvat credit agnst the service tax charged by builder. But Builder should be registered in service tax.

4. Whn Service Provider shouyld not registered. He doesn't take the service tax amount from buyer.

Namish Gupta (CA Practice ) (42 Points)
Replied 26 January 2015

Hi, CA firm purchased one office from a builder. Builder charged 3.709% service tax. Whether CA firm can take the service tax credit of the property purchased.

Firm charges its clients service tax on professional fees.

Kindly reply with reference to cenvat credit rules and case laws if any.

Regards

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bhavik (CA Practice ) (22 Points)
Replied 08 March 2017

Hi, CA firm purchased one office from a builder. Builder charged 3.709% service tax. Whether CA firm can take the service tax credit of the property purchased. Firm charges its clients service tax on professional fees. Kindly reply with reference to cenvat credit rules and case laws if any.

Regards