• Service tax on flat bought from land owner share

Dear Sir/Madam,

I have bought a new flat from land owner share last year August 2015. My Loan was approved in August and Sale Deed/Registration was done in August 2015. I shifted to House in September 1st week 2015. It was ready to move flat. It was land owner share and I bought from Land Owner. My Apartment is in Sahakara Nagar Bangalore North.

Now Builder & Land Owner asked me to pay Service Tax 3.5% of total Flat value as per Sale deed.

1. Can you please advice if I should pay Service tax or not ? There were some blogs which says, it is not applicable on ready to move flat from Land Owner Share and some says we need to pay. Please advice.

2. I have bought flat from Land Owner, so should I pay service tax to Land Owner only or to Builder's company name ?

2. If I have to pay service tax,  Is there a way I can pay directly to Government this service tax instead of paying to Builder or Land Owner.

3. I have to yet receive NDC (No Dues certificate) from Builder & land Owner. Can I take it on Builder's letterhead with Builder & Land Owner signature or I need to get some legal document for No Dues Certificate.

4. There are some work pending till now from Builder side like Boundary wall etc. I was thinking to pay service tax later if I am supposed to pay. Will it have any penalty if I pay later ? 

5. What will happen if I donot pay service tax. Its been now around 1 year I shifted to this house and my EMI is going on.

6. Do I need to pay VAT also ? Please let me know any website link if I am not supposed to pay service tax & VAT to Builder & Land Owner.

Asked 2 years ago in Property Law from Bengaluru, Karnataka
Religion: Hindu
If any payment is received before completion of the project, it is considered as a deemed construction service under section 66E and service tax is payable. Tax is payable on the service irrespective of the fact who is actually providing the service. In the present case as the landowner will take bookings against his portion of the flats to be constructed, service tax will be payable by him.
 Rule 3 of Taxation Rules is that "wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance."  Hence advance is consideration money in your case.

1.  You have to pay the service tax to the owner who will inturn pay the same to the government

2.  The service tax can be paid to the builder, you cannot pay it directly, to confirm payment of the service tax to government, you can obtain the service tax registration number fro the builder o cross verify the payment. 

3.  You can get it on his letterhead also.

4.  The service tax is to be paid to the government by the service provider, so the penalty will depend on him.

5.  He may demand interest on the applicable service tax along with the service tax.

6.  You can browse in the internet you will get of links in this connection.
T Kalaiselvan
Advocate, Vellore
36925 Answers
403 Consultations

5.0 on 5.0

if you have purchased flat wherein construction has been completed  and  building completion certificate issued  issued you don't need to pay service tax  

2)     As per ruling  Supreme Court , the sale of under construction flat / property is liable to pay VAT. 

3) if at all any service tax is payable if flat was under construction you have to pay to the builder 

4) iif you pay later builder will levy penalty on you 
Ajay Sethi
Advocate, Mumbai
46766 Answers
2767 Consultations

5.0 on 5.0

Ideally the builder who has developed and constructed the building will be a registered service tax dealer, in which case for the flats constructed he is liable to pay service tax collected on your behalf to the government, even if the flat has fallen to the share of the land owner, the land owner has sold the flat to you and therefore he will collect this from you to be paid to the builder, who will issue a receipt towards this.
Ideally after registration this amount must be paid to the government, so there is already a delay in payment of this amount.
The government can initiate action for the recovery of this amount from you together with penalty and interest charges. you could go to jail if this amount remains unpaid.
VAT is not payable by you.
Kiran N. Murthy
Advocate, Bangalore
1017 Answers
91 Consultations

5.0 on 5.0

If there is no building completion certificate you will have to pay service tax 

2) request builder to obtain building completion certificate and occupation certificate 

3) it would imply that construction has been completed as per sanctioned plans 
Ajay Sethi
Advocate, Mumbai
46766 Answers
2767 Consultations

5.0 on 5.0

The service tax payable on this is at the uniform rate across the country, there is no specific rule for Bangalore in this regard. 

You can get the NDC or NOC from the builder on his letter head also.

The builder has to procure the CC or OC from the concerned authorities and hand it over to the buyers before registering the flats/apartments to them.   The fact that he has not provided the same to other residents is not an excuse in law or an acceptable reason by the builder.

Property transaction in India is document intensive exercise because of complex legal, statutory and regulatory framework.
Few documents which are to be obtained are :

copy of sale deed/title deed/mother deed/conveyance deed:   To establish the ownership of seller on title of property.

RTC extracts:  required for Property Purchase

Khatha certificate d extracts:  required for  transfer of property

Mutation register extracts,

Joint development agreement

GPA deed:  required to establish whether the previous Sale or Purchase was carried out by authorized person on Seller or Buyers behalf

Builing plan sanctiond by the statutory authority

NOC from EB, PCB, Water supply authority, Airport authority etc.

Allotment letter from the builder/Cooperative housing society/BDA/housing board

Sale agreement between the builder and the 1st owner

Sale agreement with the seller

Any other documents that may com to the light of the knowledge relevant to this subject. 
T Kalaiselvan
Advocate, Vellore
36925 Answers
403 Consultations

5.0 on 5.0

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