The Budget proposal to levy service tax on real estate sector may have upset home buyers, but it has given a reason good enough for the tax officials to investigate and collect chargeable service taxes from the real estate companies that have not been paying the exchequer.
The service tax commissionerate, service tax arm of the Central Board of Excise & Customs (CBEC), has been dealing with the issue of non-payment of service tax by the builders, thereby blocking taxes worth crores.
The latest was a search on a global builder (Samiah International Builders) where the department got over Rs 70 lakh cash as the surrender amount along with information that reveals non-payment of a huge sum as service tax , a tax official told FE.
The service tax department has been dealing with the complexity in taxation of services provided by builders but no decision was taken on the matter in any case.
However, after the Budget proposal in February this year that talked about inclusion of the services provided by builders in the service tax list, tax officials are also feeling sure before pursuing a case for non-payment of tax, the official said.
The Budget proposal would become a reality after the finance bill becomes a law and the notifications in relation to the tax proposals are issued. The government has the power to decide on the applicability of the rule from a future date or the same day.
The tax works out to about 3-4%of the total cost of an apartment, as it is applicable only on the value of services. So roughly, if a buyer books a flat of Rs 20 lakh, he will be required to shell out an additional Rs 60,000-80,000 on account of the service tax component.
There has been lot of pressure from the industry to roll back the proposal to levy service tax as the burden would be passed on to the consumer.