Buy­ing a home within mu­nic­i­pal lim­its vs gram pan­chayat ar­eas

In­vest­ing in prop­erty in a gram pan­chayat area can be a lu­cra­tive op­por­tu­nity, es­pe­cially if the lo­cal­ity is slated to be in­cluded within the mu­nic­i­pal lim­its in fu­ture

HT Estates - - HTESTATES - Ash­winder Raj Singh

buy­ers to approach the depart­ment seek­ing re­fund of ser­vice tax paid to de­vel­op­ers. Given the above, the flat buy­ers may con­sider tak­ing the fol­low­ing steps in or­der to ob­tain re­fund of the ser­vice tax paid to de­vel­op­ers.

Form a group of res­i­dents in­ter­ested in seek­ing the re­fund, and com­pute the ser­vice tax paid by each flat buyer

Col­late the flat buyer agree­ment and in­voices raised by the developer from time to time men­tion­ing the ser­vice tax amount, and re­ceipts con­firm­ing the pay­ment of said in­voices

Approach the developer with a copy of the High Court or­der and ap­prise them of the le­gal po­si­tion

Ask for the copy of ser­vice tax re­turns filed by the developer dur­ing the rel­e­vant time along-with chal­lans for de­posit of tax

Get an un­der­tak­ing/af­fi­davit signed by the developer that en­tire ser­vice tax col­lected for the pro­ject has been duly de­posited with the gov­ern­ment

Approach the ser­vice tax au­thor­i­ties with the above doc­u­ments and seek re­fund of the ser­vice tax amount While the High Court di­rected the gov­ern­ment to re­fund the ser­vice tax to the two pe­ti­tion­ers in the case, for oth­ers, get­ting their money back may not be de­void of chal­lenges.

For starters, the buy­ers may face stiff re­sis­tance from de­vel­op­ers for pro­vid­ing the ser­vice tax re­turns and pay­ment de­tails. This is be­cause gen­er­ally, the re­turns filed by the de­vel­op­ers would re­late to mul­ti­ple projects and iden­ti­fy­ing com­pli­ance

against an in­di­vid­ual pro­ject may not be pos­si­ble. Fur­ther, pro­vid­ing re­turns and chal­lans for scru­tiny of the depart­ment of­fi­cers may not be in the best in­ter­est for de­vel­op­ers as it may lead to un­re­lated tax issues crop­ping up.

Even if the developer agrees to give the doc­u­ments as men­tioned above, the tax au­thor­i­ties may want a de­tailed break-up ( pro­ject- wise/ in­di­vid­ual flat­wise) of the amount of ser­vice tax paid by the developer.

This can be a her­culean task for de­vel­op­ers fil­ing sin­gle re­turns for mul­ti­ple projects and in that case, flat buy­ers will need to work back­wards with the de­vel­op­ers to as­cer­tain such amounts and get the same cer­ti­fied by a char­tered ac­coun­tant.

Also, given the wide ram­i­fi­ca­tions of the de­ci­sion, it is highly likely that the depart­ment may file an ap­peal be­fore the Supreme Court and pend­ing

de­ci­sion of the Supreme Court, deny the re­fund of ser­vice tax cit­ing that the mat­ter is sub ju­dice.

For projects where the con­struc­tion is still not com­plete, the home­buy­ers can ex­plore the pos­si­bil­ity of ap­proach­ing the developer to ad­just the amount of ser­vice tax paid be­tween 2010 and 2012 against any fu­ture ser­vice tax li­a­bil­ity on their flat. From a statu­tory stand point, such ad­just­ment can be al­lowed.

While seek­ing re­fund from the ser­vice tax au­thor­i­ties may have its chal­lenges, given that each flat buyer may be able get a re­fund of asub­stan­tial amountof money paid as ser­vice tax be­fore year 2012, it may well be worth the ef­fort to pur­sue the same after due le­gal con­sul­ta­tion.

The de­ci­sion of whether t o pur­chase a home within a city’s mu­nic­i­pal lim­its or in one of the gaothan / gram pan­chayat lo­cal­i­ties can be a per­plex­ing one. There is usu­ally a sig­nif­i­cant cost ar­bi­trage im­plied in the sec­ond op­tion, but it of­ten does come with draw­backs as well. Let us ex­am­ine both op­tions.

In­vest­ing within mu­nic­i­pal lim­its

There are def­i­nitely dis­tinct ad­van­tages to buy­ing a prop­erty which falls within the city’s mu­nic­i­pal lim­its. For in­stance, such prop­er­ties can usu­ally de­pend on a more reg­u­lar wa­ter sup­ply from the mu­nic­i­pal­ity. In­fra­struc­ture is an­other func­tion for which the mu­nic­i­pal­ity is re­spon­si­ble, so projects within the mu­nic­i­pal­ity lim­its tend to have bet­ter roads. There will usu­ally be a very de­cent sat­u­ra­tion of shop­ping out­lets and hos­pi­tals in such lo­cal­i­ties.

Also, the pop­u­la­tion re­sid­ing within the mu­nic­i­pal lim­its is usu­ally of a more cos­mopoli­tan na­ture. The down­side is that prop­er­ties in such ar­eas tend to be ex­pen­sive with high prop­erty tax as well as main­te­nance charges when com­pared to gram pan­chayat ar­eas.

In­vest­ing in a gaothan/ gram pan­chayat area

Gram pan­chay­ats or gaothans are ba­si­cally vil­lage ar­eas. Though many of them have seen rapid de­vel­op­ment, the fact is that this de­vel­op­ment is largely op­por­tunis­tic. De­vel­op­ers are

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