Posts Tagged ‘Service Tax’

Home buyers need not worry about being levied a service tax

Monday, April 12th, 2010

Local authorities in some states do not issue completion certificates while others take many years to issue one. The budget for 2010-11 has proposed Service tax if payment is made before the completion of construction. If Home buyers and property developers cannot procure a completion certificate from the local authority they need not worry about being levied a service tax. The government could allow some independent authority to certify that the property is complete.

“We are examining the issue and will see if a similar certificate from an outside agency can suffice,” said a finance ministry official.The service tax will be levied only on 33% of the base price of a flat sold at construction stage. Charges such as development fee, parking fee and premium location usually paid at the time of completion of construction will also be included in the base price. The new rule will come into effect when Parliament approves the budget.

Home buyers and property developers need not worry, if they cannot procure a completion certificate.The finance ministry may admit a certificate from an architect or builders association as a sufficient proof of completion. Sale of fully completed houses will be exempt from the tax if a completion certificate from a local authority is provided.

Non-availability of completion certificate can increase the cost of a property as the 3.3% service tax would be significant, taking the tax element to nearly 10% after including the stamp duty.Property developers had a mixed response to the proposal. Rajeev Talwar, managing director of DLF, the country’s largest developer, felt the flexibility could be abused. However, an executive of Delhi-based developer Ansal API appreciated the government’s decision. “If the government takes the decision to outsource the whole process to an accredited agency, it will take the pressure off the realty firms.”

Reference:

The Economic Times

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Proposal to Restore the Rate of Service Tax

Thursday, June 11th, 2009

Earlier  government has reduced the service tax to 10% from 12% . The government is now considering a proposal to restore the service tax to its earlier rate of 12%. In the third stimulus package announced in February, government has reduced service tax to 10%. The option for withdrawing the service tax cut is on the account of increase in government expenditure and an attempt to boost the economy.

Final decision would be taken by Finance minister in consultation with planning commission and Prime minister’s office (PMO). Service tax collection estimates to be collected around 60,000 crore, registering a growth of 18% even though collection in indirect tax declined due to the downturn.

There is another option to boost service tax collection by including segments like education, legal and medical service but finance minister would have to build political consequence. These sectors are sensitive in social sector point of view and taxing them could invite more oppose.

Links to refer:

http://economictimes.indiatimes.com/News/Economy

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Large Cooperative Housing societies in India have to pay Service Tax

Wednesday, May 20th, 2009

Service Tax for Cooperative Housing societies

Service tax charge is charged on service provided by Cooperative Housing Society (CHS). In rules of service tax department, if a cooperative society crosses the collection of four lakh rupees from its members, service tax is warranted on taxable services. Total Service tax would be 12.24 % (service tax is 12% and 2% education tax on the top of it). Therefore collection of less than four lakh rupees per annum by a society does not warrant any service.

Service Department rule says, cooperative housing societies (CHS) can be taxed under the group of ‘Club of Association Services’ as included in u/s 65 (105) of the Finance Act, 1994 effective from June 16, 2005. ‘Club’ or ‘Association’ is classified u/s 65 (25a) of the Finance Act (No.2), 1994 as revised by the Finance Act, 2005.

The description mentioned above is quite extensive and envelops almost any individual or body of individuals providing service to the members of its society, amenities or returns for a payment or any other amount comes under. It is under these stipulations that the department levies tax on cooperative housing societies as service tax. Thus, since June 16, 2005, it is mandatory for cooperative societies to pay service tax.

For a cooperative society, service tax will have to be paid prior to 5th of every month. However, for March, the last month of the year, payment has to be done by 31st March. It must be noted that on the sum accumulated by the society together with transfer fees, donations, transfer charges, repairs and maintenance contributions, 12.24% will be gathered and the same needs to be deposited in the banks endorsed by the service tax department. The proceeds considering service tax have to be filed twice a year. For the period from April first to September thirtieth, the returns need to be filed on or before October twenty-fifth. For the second half of the year, the returns need to be filed on or before March thirty first.

In case of delayed payment, interest has to be paid at the rate of 13% per annum. The service tax department can exercise the power to impose fine as per the terms of Section 76 for non-payment or short payment of service tax and Section 77 for not filing return.

CENVAT credit is offered to cooperative societies in respect to service tax, which comprises all payments made by the society on which the society has paid the service tax, for instance, telephone bills, security charges, etc. Subsequently, all payments done on or after June 16, 2005, are entitled for CENVAT credit.

Interesting Links to follow:

http://answers.yahoo.com/question/index?qid=20070710225606AAWXEz5
http://www.dnaindia.com/report.asp?NewsID=1008540

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