The Maharashtra Chamber of Housing and Industry (MCHI), through a petition filed in the Bombay High Court, has challenged the levy of service tax on building and construction activities undertaken by builders and developers.

In July, the High Court (HC) had asked the central government not to take any coersive steps against the builders body for recovery of service tax until the petition is decided.

However, in an order passed in August, the court said the interim relief granted to the MCHI would extend only to those of its members who have undertaken to pay the service tax in case the petition is dismissed.

The verdict in the case may be of great significance for home-buyers as it may either rid them of the additional cost on account of paying service tax to the Centre or saddle them with extra costs making homes dearer. Justice D Y Chandrachud and Justice A A Sayed are likely to hear the case further on November 29.

In its petition, the MCHI has contended that the transaction between the builder and his client, prospective buyer, is essentially a transaction of sale and purchase of immovable property. This transaction has been subjected to various other taxing events such as resignation charges, stamp duty and so on. The same, therefore, under no circumstances can be construed as service and therefore, subject to levy of service tax.

In the petition challenging sections of the Finance Act, 1994, as amended by the Finance Act, 2010, the court had earlier observed that arguable questions were raised that needed consideration.