E-Paper
CAs say don?t let builders ?tax? you!
HOLD ON! Better go through the service tax rules before you pay a hefty service tax on purchase of a flat! This is how the Lucknow Chapter of the Institute of Chartered Accountants of India (ICAI) has cautioned flat buyers against unscrupulous builders charging service tax even while they are not authorised to charge if they have built the colony on their own land. ?The service tax doesn?t apply to properties built and sold from land owned by a builder himself.
HOLD ON! Better go through the service tax rules before you pay a hefty service tax on purchase of a flat!
This is how the Lucknow Chapter of the Institute of Chartered Accountants of India (ICAI) has cautioned flat buyers against unscrupulous builders charging service tax even while they are not authorised to charge if they have built the colony on their own land.
“The service tax doesn’t apply to properties built and sold from land owned by a builder himself. We would like to caution the purchasers of residential property to watch against being cheated by builders in the name of service tax in the city,” Raj Kapoor, Chairman of the Lucknow Chapter of the Institute of Chartered Accountants of India (ICAI) told HT Lucknow Live.
He said the service tax was chargeable only on those properties where a customer utilises the services of a builder to construct a house or any builder who collects the booking amount from customers to construct 12 flats or more on land not owned by him.
Kapoor said 67 per cent of the total cost of construction goes to the material purchase and hence is out of the purview of service tax. That means only 33 per cent of the cost is open to the tax.
“It is our apprehension that purchasers of flats aren’t aware of the service tax rules for the real estate sector at all,” he said.
It is only the service component of any real estate activity taken up by a builder, which is taxable. The service tax rules for the real estate sector got effective from October 16, 2005 and thereafter the services provided by the builder had become taxable, he said.
There is a queer dimension to the entire service tax issue. Quite a few builders quote a price for a property much higher than the usual market price while explaining the “service tax” burden on them. The fact remains that these builders aren’t supposed to collect service tax at all as the property had been built on their own lands. Moreover, a majority of the investigations on service tax matters has evasion and non registration by the builders as the focal point for nabbing the culprits. There is little or no investigation on builders who are collecting service tax from buyers of flats while being not eligible for the same at all !!
