We have approx 400 flats in our complex. 10 to 15 % flats are not yet sold by builder and he has been maintaining society operations since last 7/8 years. He is charging approx Rs3500 /- for 1 BHK and .5000 for 2 BHK , which includes Property tax and maintenance component. In his bill he has not shown any break up of amount charged. He is charging and also showing separate service tax as prevailing on entire amount. Now we are about to take over the operations of society and get the book of accounts for the charges collected and expenses incurred for maintaining society. before we accept his book of accounts and take over, there is debate among the members that A ) Service Tax is Not applicable, as builder is only acting as trustee ( there seems recent Court verdict in these lines ) to run operations and also Service tax can not be charged on property tax. B) However there is no response from builder on this issue and we do not know how to challenge his ST component.w/o any legal clarification / support. Builder is also not ready to part with his ST challans with any details. Kindly advice.
If builder charges any amount on account of service tax , he is liable to deposit same to government .(even if he charged it wrongly).
so ask him to provide copy of proof of tax deposit before accepting his books.
Secondly as far as applicability of ST is concerned :refer Circular No.175 /01 /2014 – ST / F. No.354/237/2013-TRU
Dear Anuj, This refers to your reply of date regarding ST on maintenance charges levied by builder. You have asked us to collect Chalan copies from builder as proof. However the circular no 175 refd by you , pertains to Resident Welfare Association ( RWA ). My doubt is - 1 ) can the builder be termed as RWA. 2 ) Builder is charging ST on amount which comprises of property tax and maintenance. property tax portion is almost 50 % of amount charged. does property Tax collected by builder on our behalf also taxable under ST. I understand many residents have withheld the ST part of payment to builder and builder is showing it as arrears and charging interest on this. Please advice.
Dear Sir,
As per the information provided by you it appears that the Builder is still maintaining your society and collects the Maintenance charges from you.
In such a case whenever you take the handover from you, he is supposed to provide you with all the past records and accounts. You can ask for the Service tax ledger and payment challans also then in order to verify if the due taxes were paid by him for which he is legally liable.
Trust this clarifies your query.
Feel free to call back/ get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.
1 no builder is not RWA the said circular is only quoted to make you aware about taxation after takeover by residents
2.no service tax payable on property tax portion. If builder is taxable person he is liable to collect tax from service receipent and to deposit to Central gov. Ask him to reconcile accounts and collect appropriate service tax along with interest from resident/refund excess amount collected
Dear Sir, The main question still remains to be answered. IS BUILDER liable to pay service tax for services incurred as Trustee to maintain society operations If he is liable to pay tax , then only he should collect ST from US. As per similar case available in google, one builder was asked to pay ST on maintenance amount collected by him , and the verdict was that builder being only temporary caretaker , is not supposed to charge ST and pay to authority. As such we residents feel he is charging us ST but not depositing with authority. If he is not liable to pay ST,we would like to ask for refund. Please suggest your view.
there are two things
1. if a person charges any amount from other on account of service tax he is liable to deposit same with the central government.
2. Builder is a separate person , he is providing services of maintenance of society and only deemed to be agent for the amount he collect in form of property tax.So in my opinion if he is having gross receipt above 10 lakhs , he is liable to pay ST . But as you are saying that in a similar case court has taken different view , we request to kindly provide link to that judgement only after that we can analyse further.
Dear Sir,
Yes the builder is liable to collect Service Tax.
Trust this clarifies your query.
Feel free to call back/ get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.
Yes. Builder is required to charge services tax