HC stays service tax on buildings

Good news for home buyers and developers. The Bombay High Court has granted an interim stay on service tax levied by the Centre on buildings under construction. HT reports

Good news for home buyers and developers. The Bombay High Court has granted an interim stay on service tax levied by the Centre on buildings under construction.

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The interim stay was granted by Justice VC Daga and Justice SJ Kathawala, who admitted a petition filed by Maharashtra Chamber of Housing Industry (MCHI), an umbrella of organisations of more than 500 developers, on July 23.

Deferring the matter to August 3, the judges ruled, “No coercive steps will be taken against developers for recovery of service tax in relation to the provisions in question.”

However, they clarified that the assessment may proceed in accordance with the law. The service tax came into force from July 1.

Flat buyers were required to pay approximately 2.5 per cent more as service tax on the total value.

The MCHI challenged the constitutional validity of Finance Act 2010, seeking to amend the Finance Act 1994 by introducing the service tax concept of “deemed service” for any commercial or industrial construction of residential complexes done prior to obtaining a completion certificate.

MHCI pleaded that the sale of a unit in a complex, as per the settled law of transfer of property, is not a service.

Accordingly, sale by the builder should not be treated as a service, it added.