Now, the hearing is further extended up to 23rd Sept, 2010 by the Hon’ble Bombay High Court. The High Court is pleased to grant stay till then. However, the stay is applicable only to the petitioners i.e. MCHI and its members along with other petitioners. The members of MCHI are required to furnish undertaking to the court that they would meet the tax liability, if arises in future.

The stay is subject to condition that assessment proceedings can go on which means that the assessee selling under construction units should take registration & observe other formalities of payment, filing of return, etc. However, the department would not take coercive measures against the petitioners.

There is no relief to the builders & developers other than the members of the petitioners which means that not only they should take registration, but also recover & pay tax. However, they may pay tax under protest so that if the levy is held invalid, the flat purchasers who have suffered tax burden should be in a position to claim refund. Further, in that case the builders/developers would not be subjected to interest & penalty.

Builders/Developers may also safeguard their position by depositing the amounts collected in escow account and taking appropriate steps that the collection should not amount to tax collection which otherwise would have to be deposited with the Government.

It is to be noted that as per the law, amount paid up to 30th June, 2010 is not liable to tax. Further, no liability would arise for service provided up to 30th June, 2010 as the tax is on provision of service from the effective date, i.e. 1st July, 2010. However, it is a moot question as to how to arrive at service provided before the effective date. Further, the question of issuing running invoices to the purchasers would also arise for the purpose of payment of service tax upon receipt of installments towards the purchase.