NCR homebuyers seek service tax refund on EMIs paid to builders

NOIDA: Homebuyers across NCR are now shoring up support to seek refunds of service tax on installments paid to builders, with the National Consumer Disputes Redressal Commission (NCDRC) ordering the refunds earlier this week, citing a Delhi high court ruling.

The Delhi high court had ruled on June 3 that homebuyers cannot be charged service tax on payments made towards purchase of under-construction apartments from builders if the total value of the apartment includes the land value. It held the service tax is only payable on the value of services and not on the value of land.

In the case of Suresh Kumar Bansal Vs Union of India & others, the court had also said that if the developer has already collected service tax, buyers would be refunded the amount with 6% rate of interest by the Centre's revenue department. However, the high court judgment applies to flats purchased before July 1, 2012.

The builders charge homebuyers service tax at the time they make part payments — currently it is 3.8% of the total sale value in NCR. Since most homebuyers in the NCR have signed up for apartments prior to construction, they are now made exempt of service tax.

"We have made the buyers aware of the Delhi high court ruling and the recent NCDRC order on the basis of it. Now we have asked all buyers to come forward and notify the tax department about the amount of tax that has been already paid. The builders will now need to secure refunds from the tax department and refund the same to the buyers," Indrish Gupta, a member of NCR Homebuyers Association, said.

Gupta, who is also the co-founder of Noida Extension Flat Owners Welfare Association, says if the taxes are not refunded, buyers may even move court for redress.

"The June 3 order brought in clarity that any project which is not complete and where people are not living cannot be categorised under service tax. So far, builders have levied this tax from all buyers. The Delhi high court's ruling clarified that builders would have to seek refund. Now this has been endorsed by NCDRC," said Amit Chauhan, founder of Logical Buyer, a homebuyer's forum.

However, Credai (NCR) president Manoj Gaur said, "If there is a ruling, then the government needs to return the funds to the buyers. They can do that directly. Builders have so far been middle agents for this tax. If the builders have to execute it, then the funds need to come back to the builders first. If such a huge amount of fund are to be returned to those who have already paid this tax, this is going to be a mammoth task."

SOURCE: ETRealty