SERVICE TAX RELIEF FOR HOME BUYERS
Thousands of property buyers who have paid service tax on the
residential apartments/flats they have purchased now have something
to cheer about. The Union finance ministry has issued the much-
awaited clarification exempting builders/developers, undertaking
residential constructions, from the service tax net. Two Pune-based
builders' organisations — the Promoters and Builders Association of
Poona (PBAP) and the Marathi Bandhkam Vyavasayik Sanghatana (MBVS) —
had made a representation to the ministry over the issue, besides
filing a case in the Bombay high court. The organisations on
Saturday received copies of the finance ministry circular, dated
August 23, 2007. The construction industry was included in the
service tax net in the Union Budget 2005-06, but builders and
central excise officials had been debating whether service tax can
be imposed on residential properties with more than 12 tenements.
The finance ministry's latest circular categorically exempts
developers/builders from collecting service tax from property
buyers, provided they had constructed the residential complex by
employing direct labour. Also, in all such cases where the
developers had employed the services of a contractor, it is the
contractor who will have to pay service tax and not the builder. The
finance ministry has also pointed out that the circular is based on
the "comprehensive review" of all technical issues pertaining to
service tax by a special committee headed by T.R. Rustagi, former
chief commissioner of customs and central excise, and also the
director general of inspection.
CAclubindia
