Service tax is not payable if the apartment is sold after completion subject to some conditions. However, service tax is applicable if the apartment is booked and agreement is entered into during construction. In this case, relevant services that are applicable are construction of residential complex and works contract service. There is a view that former is applicable when the company is only developing/constructing the property owned by the service recipient. Works contract service is applicable in cases where there is transfer of property in goods involved in execution of the contract which is leviable to tax as sale of goods. While the rate under former service is 3.09% on the basic price provided land cost is included in the service value, the rate under works contract service is 4.944% on construction value of the sale price.
As the methods in vogue are different, comparing only service tax with others may not be advisable in all cases and buyers are advised to be guided by overall cost of their unit as compared to similar units in the neighborhood and other factors like quality, reputation of the developer, amenities and project approvals