Now, get ready to claim refund of service tax paid to developers
To start with, residents should form a group and collectively seek a refund of the service tax from the builder
TThe Delhi High Court in the recent case of Suresh Kumar Bansal vs Union of India has held that no service tax can be levied on flats purchased prior to June 1, 2012, bringing much cheer to thousands of homebuyers across the country.
It is a common fact that developers across India charge service tax on construction of flats on a percentage of the total sale price of the flat. It is this very levy that was challenged before the High Court.
There were essentially two issues before the courts – whether the legislature is competent to levy service tax on sale of underconstruction flats, and whether the service tax law provides for a proper measure (valuation) for service tax to be imposed on under-construction flats.
On the issue of levy, the court held that the Parliament is fully competent to levy service tax on sale of under-construction flats and the same cannot be disputed.
However, on the question of measure of tax, the court held that neither the Act nor the rules provide a machinery provision for determining the value of services to arrive at the measure of service tax for under-construction flats.
Thus, no service tax can be levied on such services. What’s more, the court went a step further and directed the government to refund the amount of service tax to the petitioners with interest after due scrutiny of whether tax has been actually deposited by the developers.
The High Court order is quite significant as it has opened a window of opportunity for flat