By Neeta Agarwal, Chartered Accountant, guest blogger of ApartmentAdda.

Construction of Residential Complex was brought under service tax w.e.f. 01.06.2005 and there was no ambiguity among the stake-holders at the operational level- “Any service provided or to be provided to any person, by any other person, in relation to construction of a complex is classified as Construction of Residential Service and is liable for appropriate Service Tax, as applicable.”

But with the issue of the Circular 108/2009-ST dt. 29.01.2009, which states that construction of residential complex is in the nature of self-service and hence service tax is not applicable, all the stakeholders at the field level have started interpreting and giving different meaning, resulting in ambiguity, chaos & uncertainty.

However, in layman’s terms, the following points emerge on a detailed understanding & analysis of the said Circular:

1. Applicability of the Ciruclar: The Circular is applicable to all unit owners within a residential complex, who have paid service tax to their respective builders as part of the total cost of the unit.

2. Eligibility of Owners: Out of the above, only those owners are eligible for refund of service tax who have registered the property with the full value i.e. the construction cost plus share of undivided portion of land meaning that the owner did not have any rights in the unit until the execution of the Sale Deed.

3. Cut-off date for applying for Refund: The cut-off date for applying for service tax refund u/s 11B of the Central Excise Act,1944 is 1 year from the relevant date. Now,as per this section, the relevant date is the date of payment of service tax. Most of us must have paid this tax long back.Hence, it looks like our application would be time-barred.But, the Circular came only in 2009. The relevant date might be 1 year from the date of the circular as per another interpretation. So,to take the benefit of doubt,it makes sense to apply for refund within 29.01.2010 to stand a chance of getting it.

4. Two Refund options:

(i) If the builder has collected the service tax from the owners but not remitted to the Govt., then we have to take the refund from the builder itself.

(ii) If the builder has collected the service tax and remitted it to the Govt., then the question of applying to Govt. arises. The application should be in Form-R and accompanied by the following documents:

a.Copies of Agreement to Sell,Construction Agreement & the Sale Deed.

b.Certificate from the builder stating the amount of service tax paid for each unit owner as well as the proof of payment.Now, getting these is not as easy as it sounds. If one is unable to get these in the time frame, it makes sense to collect the client ledger copy showing the collection of service tax.

While there is no absolute surety of refund, without applying there is no chance of refund. The law will take its own course and definitely the Board would be seized of the matter and take appropriate action to dispel the doubts for the benefit of the common man and also to augment the legitimate Service Tax due to the exchequer from this major potential service.

Note: This article aims at providing an informed & qualified opinion on the topic. Please use it as a guidance for further discussion and relevant action. You may post your questions/inputs in the Comments section below. To avail Professional Services for your Service Tax Refund, please place your request here. It is recommended that the Service Tax Refund activity is undertaken by the Association rather than each individual owner.