Service tax on maintenance charges by builder

We have approx 400 flats in our complex. 10 to 15 % flats are not yet sold by builder and he has been maintaining society operations since last 7/8 years. He is charging approx Rs3500 /- for 1 BHK and .5000 for 2 BHK , which includes Property tax and maintenance component. In his bill he has not shown any break up of amount charged. He is charging and also showing  separate service tax as prevailing on entire amount. 

Now we are about to take over the operations of society and get the book of accounts for the charges collected and expenses incurred for maintaining society.  

before we accept his book of accounts and take over, there is debate among the members that 

A ) Service Tax is Not applicable, as builder is only acting as trustee ( there seems recent Court verdict in these lines ) to run operations and also Service tax can not be charged on property tax. 

 B) However there is no response from builder on this issue and we do not know how to challenge his ST component.w/o any legal clarification / support.  Builder is also not ready to part with his ST challans with any details.

Kindly advice.
Asked 4 months ago in Service Tax from Mumbai, Maharashtra
If builder charges any amount on account of service tax , he is liable to deposit same to government .(even if he charged it wrongly).
so ask him to provide copy of proof of tax deposit before accepting his books.
Secondly as far as applicability of ST is concerned :refer  Circular No.175 /01 /2014 – ST / F. No.354/237/2013-TRU

Anuj Agarwal
CA, Aligarh
34 Answers
4.6 on 5.0
  Talk to Anuj Agarwal
Dear Sir,

As per the information provided by you it appears that the Builder is still maintaining your society and collects the Maintenance charges from you. 

In such a case whenever you take the handover from you, he is supposed to provide you with all the past records and accounts. You can ask for the Service tax ledger and payment challans also then in order to verify if the due taxes were paid by him for which he is legally liable.

Trust this clarifies your query. 

Feel free to call back/ get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP. 
Rohit R Sharma
CA, Mumbai
719 Answers
5.0 on 5.0
  Talk to Rohit R Sharma
1 no builder is not RWA the said circular is only quoted to make you aware about taxation after takeover by residents
2.no service tax payable on property tax portion. If builder is taxable person he is liable to collect tax from service receipent and to deposit to Central gov. Ask him to reconcile accounts and collect appropriate service tax along with interest from resident/refund excess amount collected
 
Anuj Agarwal
CA, Aligarh
34 Answers
4.6 on 5.0
  Talk to Anuj Agarwal
there are two things
1. if a person charges any amount from other on account of service tax he is liable to deposit same with the central government.
2. Builder is a separate person , he is providing services of maintenance of society and only deemed to be agent for the amount he collect in form of property tax.So in my opinion if he is having gross receipt above 10 lakhs , he is liable to pay ST . But as you are saying that in a similar case court has taken different view , we request to kindly provide link to that judgement only after that we can analyse further.
Anuj Agarwal
CA, Aligarh
34 Answers
4.6 on 5.0
  Talk to Anuj Agarwal
Dear Sir,

Yes the builder is liable to collect Service Tax. 

Trust this clarifies your query. 

Feel free to call back/ get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP. 
Rohit R Sharma
CA, Mumbai
719 Answers
5.0 on 5.0
  Talk to Rohit R Sharma
Yes. Builder is required to charge services tax
Abhishek Dugar
CA, Mumbai
766 Answers
5.0 on 5.0
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