Realty developers and builders may have to wait to hear a final word from the government on their service tax liability. The Central Board of Excise & Customs (CBEC), which is reviewing the move to levy service tax on builders, has decided to seek the law ministry’s opinion on the matter.
“The law ministry wil l be asked to expedite giving its opinion as writ petitions are pending before high courts,” said a senior government official. Realty developers in Pune and Mumbai have challenged the government’s decision to impose service tax. The dispute is whether the estate builder per se is a service provider.
Builders claim they are fulfilling a contract that has no service element attached to it. So, they are not liable to pay service tax. The law ministry may have to give its views on whether the Centre has the legal authority to collect tax on this kind of a transaction, said sources.
Residential complexes were brought under the service tax net from June ‘05. A 12 percent service tax is being added to the cost of a flat in all housing complexes with more than 12 units. The levy was initially imposed on industrial and commercial complexes in September ‘04.
The Promoters and Builders Association of Pune (PBAP) and the Maharashtra Chambers of Commerce and Industry filed writ petitions in the Mumbai High Court after show cause notices and summons were issued by the revenue department to builders who did not pay the levy.
According to Hemant Naiknavere, vice-president, PBAP, the revenue department’s council gave an oral assurance that he would inform the department to refrain from taking any coercive action against the builders till the court gives its ruling. This means the revenue department will not pressurise builders to pay the tax (or status quo will be maintained).
Source: The Economic Times
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