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Easier for home buyers to get service tax exemption
June, 24th 2010

Home buyers and property developers can now enjoy exemption from service tax without much ado. A notification issued on Tuesday by the Central Board of Excise and Customs said that apart from the government agency (in this case, the local civic body), architects registered with the Council of Architecture, too, can issue a building completion certificate (BCC).

So can chartered engineers accredited to the Institution of Engineers and/or any surveyor licensed with the local body of the city or town or village where the property is located.

To get exemption from service tax, a home buyer must have a BCC from the local authority. The notification followed information that local authorities in some states do not issue BCCs. Others, like Maharashtra, take months to issue one. In Mumbai, almost 90% of the buildings do not have a completion certificate.

Mumbai developers have instead been issuing occupation certificates (OCs) to buyers as proof of completion of buildings. Developers find it easy to procure an OC rather than spending a huge amount to get a BCC from the authorities. An OC is issued when developers receive civic permission for water connections and sewage facilities.

Though a significant move, the notification has been interpreted differently by developers. Some said the flexibility could be abused. Others argued that outsourcing the job to independent accredited bodies would see lesser corruption.

Nayan Shah, managing director of Mayfair Housing, said that the appointment of outside agencies will save developers time to get a BCC, and spare home buyers from shelling out extra money for service tax.

But Deepak Goradia, managing director of Dosti Group, said that outside agencies will merely certify that the building has been built and flats are ready for sale. The local civic authority will still be the final authority to issue the BCC, he said. Developers, in principle, are opposed to the levying of service tax in ready or under-construction buildings. It burdens buyers with unnecessary expenses.

The Maharashtra Chamber of Housing Industry has decided to challenge this levy in the Bombay high court.

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