Home buyers have something to look forward to in an otherwise dull
property market. The customs, excise and service tax appellate tribunal
recently held that they will no longer have to pay service tax on the
one-time maintenance charge (deposit) paid to builders at the time of booking a flat.
impact of indirect taxes on home buyers is very high. So, this order
will, to an extent, help buyers save 12.36% (service tax) on the amount
of the deposit paid,” said Sagar Shah, head (indirect taxes), BDO India.
The one-time maintenance charge includes a flat owner’s share in the common electricity
bill, lobby and water charges in a housing complex. The charge varies
according to the project, amenities, use of property (whether for
commercial or residential purpose), the city as well as the location and
other such factors.
Buyers won’t have to pay 12.36% service tax on one-time maintenance fee paid to builders
Developers have to keep records and refund the balance once housing society is formed
Refund of balance maintenance fee after soc is formed
The order that has given service tax relief on onetime maintenance
charges paid to builders, calculated as a fixed amount on the area of a
flat or rate per square foot, also reiterates that developers keep a
separate record of the deposits and refund the balance amount to buyers
once a society is formed.
“Besides, each flat buyer who has paid
maintenance charges can claim refund on a oneon-one basis from the
service tax department. The refund, though, can be claimed within a year
of the builder crediting the tax amount to the government’s account,”
said Sagar Shah, head (indirect taxes), BDO India.
order is both good and bad, said Rajesh Mehta of Raha Realtors. “It is
good as developers will be forced to maintain proper records of
maintenance charges collected from buyers as mandated under Maharashtra
Ownership of Flats Act (MOFA). However, once a society is formed, there
is never any explanation given on how the money has been spent. In some
cases, as a society is not formed for more than a year, a meager sum
gets transferred to the society’s kitty,” said Mehta.
The order was passed by a two-member
bench of S S Kang and P K Jain, on an application filed by Kumar
Builders challenging a ruling by Commissioner of Central Excise (CCE),
Pune. CCE had asked the builder to pay service tax on the maintenance
charges collected from buyers for providing “maintenance or repair”
The tribunal accepted builder’s contention that under
MOFA, a builder is under an obligation to collect a one-time deposit and
keep it in a separate bank account as fixed deposit. “The builder is
not paying anything on his own but acting as a trustee or an agent,
collecting payments on behalf of various authorities such as the civic
body and revenue department. So, no service tax can be levied on the
deposit,’’ said Shah, a CA who appeared on behalf of the builder.
WHY THE CHARGE
Developers demand a one-time maintenance charge towards:
and repairs of common areas and facilities Watchmen & sweepers’ pay
Insurance Revenue assessment All other taxes, levies Electricity and
Source : Times Of India