Construction of a complex intended for sale by the builder before, during or after construction is deemed to be a service provided by the builder to the buyer;
No service tax is leviable if entire payment for the property is paid by the buyer after completion of the construction including certification by the local authorities;
Thus service tax has been levied on any commercial or industrial construction of residential complex prior to obtaining completion certificate by creating a deeming fiction.
Directions by the Bombay High Court
Maharashtra Chamber of Housing Industry (MCHI), an umbrella organisation of more than 500 developers, filed a writ petition before the Bombay High Court challenging the constitutional validity of construction of complex service as amended by the Finance Act, 2010;
On 23 July 2010, while admitting the writ petition the Bombay High Court directed that no coercive steps shall be taken against the petitioners for recovery of service tax in relation to the provisions in question;
Further, the Bombay High Court observed that the assessments may continue in accordance with law;
The matter is now posted for hearing on 3 August 2010.
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