Service tax on under construction resale property

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  1. Rushabh Kanti

    Rushabh Kanti New Member

    Hi All,

    I would like to seek opinion regarding Service tax on property purchased recently. It is redevelopment property started in 2013 and nearing completion (parking and lift installation is on-going). Occupation Certificate is expected in 3 months.

    I have purchased it from existing tenant (who was member of old building before redevelopment), and not from builder.

    Also, registration of the property would be done in coming week.

    Having said that, I would like to know if I need to pay service tax on the property.

    As I understand, Service tax is levied on the service offered by the builder. Herein, I am purchasing the property from Existing tenant, who would have received service from builder. Further, Building is almost completed, and property would be registered shortly, so there would be limited service that I would be receiving directly from the builder (around parking, lift etc).

    So, I am not sure if I am liable to pay Service tax. And if so, how much that shall be? Please help.
  2. svpsat

    svpsat New Member

    Dear Rushab
    1. In case of redevlopment of existing property, service tax is applicable. In this case is it a redevelopment of a plot / building owned by a society which has entered into an agreement with the builder with the approval of the members authorised in a general meeting or
    is it a building which is owned by someone and there are tenants on rent and an agreement has been entered into with the builder by the owner and tenants.
    2. Pl study the agreements already entered into with the builder to find out whether liability of service tax if any is on the builder or member of society or tenant.
    3. Also check in the agreeement that on a resale of a flat by tenant whether your rights are protected and who bears the service tax liability if any.
    4. Normally it is negotiated with builder by the society / tenants that service tax liability if any should be paid by builder. All these terms would be covered in the development agreement which you should study first before entering into an agreement with the tenant.
  3. Rushabh Kanti

    Rushabh Kanti New Member

    Thanks for your revert.

    I believe it has been agreed that service tax shall be paid by the tenants and not the builder.

    Agreement was done between Society and Builder on this.

    However, my query is whether I am liable to pay service tax. I am purchasing from existing tenant, and not from Builder.

    Also, building is nearing completion, with occupancy certificate expected in a month. Hence, I am not rendering any service from Builder. Existing tenant (from whom I am buying) has used Builder's service, who should be liable to pay tax. I am yet to do the property registration under my name.

    Please help.
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