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

HT Estates - - HTESTATES - Sarika Goel

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

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