• Land owner and developer joint venture

We have given our land to a developer to build the apartment with 47:53 (owner:developer) ratio in 2013. Now apartment development is done. But the developer is not giving the possession letter of flats. He is demanding a service tax from the land owner about 23 Lakh. In few days back he has sent a letter with Circular 151/2/2012-ST dt.10.02.2012 to pay the amount as 16 lakh tax with 30% late fee i.e, arround 7 lakh, where as he never sent any service tax notification before this letter.
But when i went through the circular i found no where that land owner has to pay any service tax and i told him also but he is avoiding recurringly to this and sending me his CA's no to talk. 
So firstly want to know if land owner has to pay or not the service tax. 
And if land owner has not to pay and he is not giving possession letter how can we proceed to get the possession letter. Do we have to proceed with any legal action.
Asked 5 years ago in Service Tax

Hi,

“Service tax is liable to be paid by the builder/developer on the ‘construction service’ involved in the flats to be given to the land owner, at the time when the possession or right in the property of the said flats are transferred to the land owner by entering into a conveyance deed or similar instrument (eg. allotment letter).

Land owner is not liable for anything.

You must have to proceed with legal action.

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

Dear Sir,

Hope you are doing well !

Sale of land by the landowner which is not a taxable service.

Construction service provided by the builder/developer is taxable in case any part of the payment/development rights of the land was received by the builder/ developer before the issuance of completion certificate and the service tax would be required to be paid by builder/ developers even for the flats given to the land owner.

So, you/land owner are not liable for any service tax payment.

Please consult with a lawyer and take necessary legal action.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Firstly there is a liability of service tax/ GST under this circumstances because in case of JDA agreement since the consideration i.e. a share in land is provided beforehand i.e. Before completion on flat liability of service tax / GST arises.

Liability of GST doesn't arise in situation where you pay the consideration after the completion of flat.

So the demand of his service tax/ GST is correct.

But you must check the amount he is demanding because the amount of GST is 12% of the consideration and now he will collect GST and not service tax and I don't think he can collect late fee from you because it was his liability to collect and pay service tax / GST in time and not yours so ask him that you are ready to pay gst amount but not late fee amount.

If he is not providing you possession even after this then you can file a case against him keeping the JDA agreement as base.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

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