March 9, 2009, 10:49 am
The Central Board of Excise and Customs had come out with a circular dated 29-01-09 clarifying various conflicting opinions regarding the levy of service tax on purchase of apartments. This circular seeks to clarify the applicability of service tax when the developer enters into an agreement, with the ultimate owner for selling a dwelling unit in a residential complex at any stage of construction (or even prior to that) and who makes construction linked payment. The following are the clarifications of the board:
a. The initial agreement between the developer and the ultimate owner is in the nature of an agreement to sell. This, as per the provisions of the Transfer of Property Act, does not by itself create any interest in or charge on such property. The property remains under the ownership of the seller ie. the developer. It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of ‘self-service’ and consequently would not attract service tax.
b. If the ultimate owner enters into a contract for construction of a residential complex with a developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to service tax, because this case would fall under the exclusion provided in the definition of ‘residential complex’.
c. However, in both these situations, if services of any person like contractor, designer or a similar service provider are received, then such a person would be liable to pay service tax.
February 28, 2008, 11:13 am
Similarly the promoter shall not give possession of the apartments to the purchasers until he obtains a completion certificate / Occupancy certificate from the concerned authorities.
Under law, the promoter is duty bound to make a full and true disclosure of all outgoings, including ground rent, local taxes, water, electricity charges, assessment, interest on any mortgage etc. Further the promoter shall give the buyer true copies of the documents pertaining to the apartment.
Before accepting any advance payment or deposit from any purchaser regarding the purchase of a flat, a promoter shall enter into a written agreement and the said agreement shall be registered. Similarly the promoter is liable to maintain separate accounts of sums taken as advance or deposit and to be a trustee thereof and shall disburse them for purposes for which they were given.
It shall be the duty of the promoter to pay all outstanding on the flat till the property is transferred to the purchasers, provided he has collected the same from the intending purchasers. Similarly the promoter cannot unilaterally alter or add to the plans and specifications without the consent of the persons who have agreed to take the flats.
February 28, 2008, 11:11 am
A promoter of an apartment shall make full and true disclosure to the intending buyers of apartments, details regarding the nature of his title to the land on which the flats are constructed, such title duly certified by an Advocate of not less than seven years standing. He shall also make full and true disclosure of all encumbrances on such land, and shall allow inspection on reasonable notice, of the plans and specifications of the buildings, built or to be built on the land. Further such plans and specifications shall have to be approved by the local authority under the law in force.
The promoter is also duty bound to disclose the nature of fittings, fixtures and amenities to be provided; as well as the particulars in the design and the materials to be used in the construction of the building. A promoter shall also specify in writing the date by which the possession of the flats is to be handed over.
The promoter shall also prepare and maintain a list of flats with their numbers and the name and addresses of the parties and the price charged or agreed to be charged. He shall also state in writing the nature of the organization of persons to be constituted and to which title is to be passed, and the terms and conditions governing such organization of persons.