Finally, the clouds of uncertainty over levying of service tax have disappeared from the minds of realty consumers and developers.
According to a ruling by the Union Finance Ministry, the developers have been exempted from the service tax net, which has come as a sigh of relief for both, the realty fraternity and buyers.
Prior to the ruling, the developers had their own modes of conduct to collect the service tax and ensure that following the ruling there is no issue settling the accounts.
Some collected the service tax and deposited it in a separate account commonly known as Escrow account from which the amount could be withdrawn and paid.
Others took an undertaking from the buyer's bank that he or she will make the payment once the ruling comes.
"Most of the developers were taking an undertaking from prospective buyers, but there were few others who maintained a separate account for this purpose," said Manohar Shroff, trustee of Navi Mumbai Chamber of Housing. He further said the exemption of service tax will put all the confusion and uncertainty to rest for both, the developers and buyers.
The government in the last financial year brought residential complexes under the service tax regime and stated that service tax would be charged from them.
The builders meanwhile, claim this is not a service provided by them as it is only a sale. Shroff said, "The developers pay labour contractors for their services and also pay tax for the raw materials being purchased and used. So forcing another tax separately would be an additional burden on the developers and customers."
Harsh Vig from EV Homes said they had been collecting bank guarantees from the prospective buyers. "We would ask the customers to give a bank guarantee to the tune of four per cent of the entire cost.
This way, the customer has the money in his bank account and earns interest on that well. We knew that following the ruling, we would withdraw the money. Now that it has been scrapped, both the parties are happy," said Vig.
Meanwhile, buyers like Suman Bakshi who for a purchase in Kharghar had given a cheque to their developer, were happy to learn about this news. "Talks about service tax came up when we went for possession of the flat. That's when I realised that I would have to collect another few lakhs towards completing the purchase. But luckily, the developer agreed for a payment by cheque, which he would deposit only after the ruling. I am really pleased that I don't have to bear that extra burden," said Bakshi.
Home buyers get service tax waiver ::
Last updated: 11 September 2007
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