property service tax

In case of flat sales, the title transfer of immovable property with an issuance of an occupancy certificate will be exempted from any kind of service tax, on Monday the finance ministry stated.

It was long time issue in the real estate domain and to resolve this long standing issue which is directly related to the essentially of service tax on the time of sale of dwellings or flats after issuing the occupancy certificate and before issuing completion certificate. It is well known fact that these kinds of sales need consideration after the issue of occupancy certificate. According to official press release, “The definition of service under Section 65B (44) of the Finance Act, 1994, leading towards the issue of transfer of title in immovable property is not taxable”.

However; the clarification given by CBEC (Central Board of Excise and Customs) all the cases related to these areas are under the jurisdiction of BMC (Brihanmumbai Municipal Corporation) or MCGM (Municipal Corporation of Greater Mumbai).

service tax

When it comes to sale of flats or transfer of title of immovable property, so now onwards after the issuance of occupancy certificate there will be no need to pay the service tax, as per latest guidelines of Finance Ministry of India. On Monday, CBEC (The Central Board of Excise and Customs) issued the clarification and statement for the related cases which are pending in these areas and are under the jurisdiction or BMC (Brihanmumbai Municipal Corporation) or MCGM (Municipal Corporation of Greater Mumbai).

On October 23, 2015, it has been conveyed to the Service Tax Authorities in Mumbai that all the dwellings or flats or apartments, or more, in which the entire consideration is received after the issue of occupancy certificate by BMC; will fall outside the definition of “Service” which comes under the Finance Act, 1994 and it means there will be no more tax for title transfer of immovable property, as per the statement of the Central Board of Excise and Customs (CBEC).

The concerning board in the Finance Ministry stated that all the clarification was issued to resolve the long time standing issue which is directly related to the levy of service tax on sale of dwellings or flats or apartments and more after the issue of occupancy certificate and before issue of completion certificate in the jurisdiction or BMC (Brihanmumbai Municipal Corporation) or MCGM (Municipal Corporation of Greater Mumbai).

Currently, service tax is levied at 14 %, but when it comes to housing projects so it is at the abatement of 75 % which means levied on the 25 per cent of the total cost.

Are you planning to buy a new flat near Metro line, Monorail line or any other major infrastructure project in Mumbai? If yes, then be ready to cough up an additional 10 % additional development tax on property transactions in such areas.

The residential and commercial properties could get costlier as the state government is contemplating a 10% development tax on property transactions in such areas. The logic is that properties in these areas will command a premium once the projects come up.

Chief minister Prithviraj Chavan has asked the Mumbai Metropolitan Region Development Authority (MMRDA) to send a proposal to the state planning commission on how this tax should be levied. The move comes after the MMRDA complained that its resources were getting depleted and there were no new avenues of revenue generation.

The MMRDA plans an initial one-time 10% development tax on the ready-reckoner value. This tax will have to be paid while registering the property in new developments or existing structures. While 7% of the tax is likely to go to the MMRDA, the remaining 3% will go to the civic body. A final decision on the move will be taken by Chavan, said the sources.

However, the move has evoked a strong reaction from home buyers. Prakash Ojha, who is looking to buy property near Pratiksha Nagar Sion from where Mono rail passes, said, “ In fact, no Development tax should be levied at all as all such services are already chargeable. Already salary classed employees are paying more than their portion as taxes which are deducted at source, hence such a move is despicable, he added.

“It will be very cruel, unfair and inhuman if development tax is levied in addition to the other duties and taxes like stamp duty, registration, vat and service tax”, said Suresh Mirajdar, an executive working with an MNC in Goregaon. Instead of imposing this tax on new home buyers, it should be spread over the entire population in the form of increase in the monthly maintenance tax payable by all the flat owners.

Agrees Monal Patil: the benefits of the development like monorail, metro line , mumbai trans harbour link is for all and not only for the new home buyers. If it is a burden then it should be passed on to all and not the new entrant only. Old residential flat owners already have the advantage of having bought the property at lower rates and majority of the existing home owners need not necessarily be the actual users and can also be investors. The government should look at it from the point of view of the new property owners, she said.