Delhi High Court (HC), wherein, the Court held that service tax cannot be charged under section 66 read with section 65(105)(zzzh) of the Finance Act, 1994, on sale of under construction flats.
HC observed that, Rule 2A of Valuation Rules provides for mechanism to ascertain the value of services in a composite works contract involving services and goods but the said Rule does not cater to determination of value of services in case of a composite contract which also involves sale of land (i.e. undivided share of land to be acquired by the buyer).
Neither the Act nor the Rules framed therein provide for a machinery provision for excluding all components other than service component for ascertaining the measure of Service tax. The abatement to the extent of 75% by a notification or a circular cannot substitute the lack of statutory machinery provisions to ascertain the value of services involved in a composite contract.
However, preferential location charges charged collected by the builder are leviable to Service tax under Section 65(105)(zzzzu) since they are a measure of additional value that a customer derives from acquiring a particular unit.
Latest posts by Abhishek Sharma (see all)
- HIGHLIGHTS-DECISION TAKEN IN 22ND GST COUNCIL MEETING - October 6, 2017
- GST FAQ on E-commerce industry - August 1, 2017
- GST FAQ on Drugs and Pharmaceutical Industry - August 1, 2017