Your property-related legal queries answered by S.C. RAGHURAM, Partner, RANK Associates, a Chennai-based law firm

I booked a flat in February 2015 and got possession in July 2016. The payments were released stage-wise depending on the completion of work. Separate registrations were done for Undivided Share of Land (UDS) and the flat’s construction. The builder is now insisting I pay service tax for both these components.

The Delhi High Court has ruled that no service tax can be levied in respect of agreements entered between buyers and builders for flats under construction in a housing project. The Court, however, noted that service tax could be levied on the amount charged by the builders for preferential location of the flat, saying it was based on the preference of customers and amounted to value addition.

It also noted that service tax cannot be levied on the value of UDS acquired by a buyer of a dwelling unit or on the value of goods that were incorporated in the project by a developer. Despite showing this ruling to the builder, he says it is applicable only in New Delhi and not in Tamil Nadu. Please clarify if I have to pay service tax for UDS and flat value, and if yes, what is the percentage?

G Arun

Chennai

Please consult your CharteredAccountant or tax consultant for an opinion in this regard.