New Delhi: The Delhi High Court has said that there will be no service tax on contracts between buyers and builders for purchase of under-construction flats in a housing complex. The court also clarified that service tax will be necessary on extra charges that will be paid by a buyer for “preferential location“ of a flat in the complex.
This verdict was announced when there was a plea made by two petitioners who bought flats in 2011 in Max Royal that was developed by Sethi Group in Noida's Sector 76.
This judgment will definitely help buyers who have booked flats in under construction projects where they enter into a complex contract with the developer that will involve transfer of land since service tax won't change on the builder or developer.
The bench of Justices S Muralidhar and Vibhu Bakhru also clarified that a land owner hiring a builder to construct a house will still have to pay service tax.
With all these ruling going on the petitioners were ordered refund of the service tax with an interest of 6 per cent from the date of deposit till the date of refund.
The court clarified, “Clearly, service tax cannot be levied on the value of undivided share of land acquired by a buyer of a dwelling unit or on the value of goods which are incorporated in the project by a developer... (this) would clearly intrude into the legislative field reserved for the States under List II of the Seventh Schedule of the Constitution of India.“
