Service Tax on Sale of Flats After Occupancy Certificate but Before Completion Certificate
Mere transfer of title in immovable property is exempted from Service Tax
In order to resolve a long standing issue relating to levy of Service Tax on sale of flats/dwellings etc. after issue of occupancy certificate but before issue of completion certificate in areas under the jurisdiction of Municipal Corporation of Greater Mumbai i.e. Brihanmumbai Municipal Corporation (BMC), it has been conveyed to the Service Tax Authorities in Mumbai on Friday, 23rd October, 2015 that sale of flats/dwellings etc., where the entire consideration is received after issue of occupancy certificate by BMC, leading to a mere transfer of title in immovable property, falls outside the definition of “Service” provided in Section 65B (44) of the Finance Act, 1994, and is therefore, not taxable. (As per PIB – DSM/MA/AK – Release ID :129959 dated 26th October, 2015)
It is noteworthy that It was held by Hon’ble Delhi HC in case of Dy CIT, New Delhi vs. Ansal properties and Industries ltd. ITD 116, 253, (2008) 22 SOT 45 (Delhi), where the occupation certificate issued by DTCP in Haryana was considered for the purpose of granting relief on account of deduction U/S 80 IB (10) of income tax act, 1961 while As per explanation (ii) r.w Section 80-IB (10)(a) the completion certificate should be issued by the local authorities on or before 31/03/2008.
Applying the ratio it is amptly clear that the intention of legislature is to only apply service tax when the construction is undertaken by the developer / builder at the behest of the customer / intended purchaser i.e. where the consideration is paid prior to completion / occupation in essence. This is undoubtedly big relief to all developers and Builders across the Country.
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