There are some confusing statements made by you.Collecting 4% vat on advances and paying 4% vat on sub-contract charges,then again paying 14.5% on the difference between adavnces and sub-contract payments.First 4% vat applies to composition dealers.If you have opted for composition u/s 15 of KVAT Act,you can not collect vat in the bills. Your sub-contractor also can not charge 4% in the bills.Exemption can be claimed on the payments made to sub-contractor. 30-40% of the total flat cost can be claimed as land cost,depending on the value of land.If there are any extra charges for depsiting to KPTCL,BWSSB,or others,they are to be reduced.If any purchases are made for contruction in flats ITC can be cliamed.Out of the balance amount site expenses and labour charges can be reduced.Normal GP is to be approtioned to these items of exemption and added.On the residual amount you have to pay 14.5% vat,if not under composition.Under composition sub-contractor T.O and land cost only have to be deducted.If any further doubts you may contact me at Mob: 9482222280........mjk

1. I am looking to buy a ready to move in new property in bangalore - The final stages of polishing and plumbing work is only left , ready for possession April 2014

2. The property says its a land owner share 

3. It was advertised as no VAT and Serivce tax to be paid for land owner share , BUT now when I showed interest , I was asked to pay for VAT and ST as it seems Supereme court order has been implemented.

4. My question is , how is the ST and VAT calculated: Below are the details

Sqfeet : 1124 @ 4750.00

Car Parking : 200000

BWSSB & BESCOM :140750

Ammenities : 25000

Generator : 20000

Legal charge : 20000

The builder came up with some complex calcuation and I dont think it is correct. everytime I talk to him, they keep coming up with new rates etc and try to play with the total cost. It will be of great help if I can get the final correct calculation

regards

Subash

Dear Sir,

Greetings for the day !!!

We feel privileged to have your views here in this forum. I have a query regarding applicability of Service Tax and Vat on Flats.

Recently I booked a flat in Bangalore. The Company has provided flats on RIGHT TO OCCUPANCY basis and there will not be any sale deed for the said flats. We can implied from this, that whatever amount I have given to the Company (i.e. Consideration to occupy that flat) has been treated as deposit with the Company and at any point of time, when I may surrender my flat (RIGHT TO OCCUPANCY) to the Company and can get my money (consideration paid to occupy flat) back .

The Company did not charge Service Tax and VAT on such flats earlier due to their contention that it is merely transfer of RIGHT TO OCCUPANCY. But now the Company is asking for Service Tax and VAT on the said flat.

My queries are as follows :

1) What is the difference in the SALE OF FLATS and RIGHT TO OCCUPANCY only?

2) Whether Service Tax and VAT is applicable on RIGHT TO OCCUPANCY of any Flat? (since renting of dwelling units does not attract service tax, as well as the ownership in the flats has also not been transferred in my name, it remains with the Company and I enjoy only right to occupancy of the flat).

Thanks & Regards

Mr Surendra,

  This is a new system in property dealings. So far, I have not come across any transaction on 'Right to Occupy' basis. However, when there is no sale deed and registration of the same,it is clear that the sum paid is in the form of a security deposit.The ownership remains with the builder himself.It is quite similar to leasing of houses instead of renting.No rent is also paid as long the tenant occupies a flat.Here, the builder does not transfer any property nor receives any regular income for occupation of the flat.Of course, he may enjoy interest of the amount deposited with him.In this position there can not be liability of VAT or ST. Hence demanding the same from flat occupants is illegal.

The builder might have paid to his contractor both VAT and ST for construction done,but,it can not be recovered from the flat 'Occupants'.

In the case of sale of flats there will be transfer of property and some construction service will be involved. Further,for excuting sale of a flat due amount of undivided share of land is also to be sold and registered.In the case of mere 'Occupancy' there is no such sale of undivided share of land. When flats are sold a society of flat owners takes possession of the entire property,but in this new system of 'Occupancy' there can not be any change in the ownership. In future,many more complications may unfold as such dealings may spread out.......mjk

Hello MJK Sir,,

I am looking for an under construction property in Bangalore ,the possession for which is at 2016 Dec

The property is under JDA with landowner . The builder is giving two agreement (1. Construction ,2. Sales) Could you clarify on the tax as below charger by builder and what is right amount -

By builder
1. VAT = {(Basic cost + Car parking +bescom/bass + club membership)*9.5}
2. Service TAx = {(Basic cost + car parking +,bescomm+ club+ maintenance + corpus fund)*25%*12.3}

Please clarify and suggest.If possible share the reference so that I can share with builder

Miss Neha:,

Generally, a builder charges on land cost,construction cost,adavnces to Beascom and BWSSB,corpus  fund for association, club membership etc.,First they quote basic rate per Sq Ft .This is called as basic cost and includes land cost also.Normally,car parking is just an open space earmarked for each apartment with white paint.VAT liability is on transfer of property(material)  and ST is related to services rendered in a construction.So,out of the basic cost you have to reuce the land cost(normally 40%) to get the construction cost.In Bangalore most of the builders collect 4% VAT and 4.12% ST on the construction cost.In fact,even this is higher than what they pay to the govt.This is the rate of composition scheme.But builders pay at normal VAT scheme,which works out to 2.5%(appx) after availing Input credit. ST @ 4.12% on construction cost is nearly correct.

Adavances to bescom and and bwssb are payable to those departments(not fully),and not amounts of any sale or service.Therefore VAT and ST are not applicable.Similarly corpus fund and club membership are not taxable. None of the general facilities are sold to you and not taxable.

On these points now you work out your actual liability.....mjk

Thanks alot Sir.

This is a specific case of JDA between the builder and owner of the land and hence he has deducted landcost from few %age of the apartment while in our case, the land cost is included which he is saying is above the said slab.

Please guide me on the VAT calculation for bangalore for JDA property and share any circular which I can refer to with the builder  to make amendments if required

Miss Neha,

A flat buyer is not affected by the JDA or other method of building an apartment and selling it. It is only rhe govt,builder and the land owner who are concerned with a JDA. In any case a flat buyer pays VAT on material consumed and ST on services rendered during the construction of his apartment.This priciple is same as explained in my earlier message. In no way land cost can be made taxable to VAT or ST.There is nothing like a slab to include some part land cost in taxable amount.There are circulars to state that even in the case of a JDA all apartments built by a builder is taxable only. No circular or law states that land is liable for VAT or ST,whether through the land owner or builder.If you like even you may talk to me over mob :9482222280....mjk

Hello Sir,

Appreciate your immediate response. This would help me in discussing with the builder .

I would request you to share the reference of circular both on VAT on JDA property and the circular you are referrring as the builder is very adamant and asking for proof on such thing.

VAT %age calculation circular as the vendor is putting 9.5% instead of 4% as mentioned above

His calculation

VAT = (basic cost + Car park + Bescomm + Club membership) * 9.5%

Whereas as per your suggestion I understand it should be

VAT = (basic cost +Cark park + bescom+club membership - landcost)*4%

Please correct me if wrong

Respected MJK Sir,

First of all, appreciate your advice and patience to answer queries from all of us. We really feel honored to be members of the community you are active in. 

I have read your previous replies, and understand the following pertaining to ST and VAT. Kindly correct me if I am wrong.

Let us say ATC corresponds to the Total construction cost excluding car park, club houses and amenities, and does not include the cost of land. In that case,

Service Tax = 4.12% of ATC 

VAT = 4% of ATC (normal scenario); Ideally 2.5% of ATC 

A reputed builder has shared the following cost attributed to ST and VAT. May I request you to check and help identify the discrepency?

1. ST on Car Park, Club House and Premium Location Charges @ 12.36%

2. ST on ATC @ 4.94%

3. VAT on ATC @ 10.15%

You mentioned Composite scheme vs. Normal scheme for VAT. Can you please elaborate further?

Secondly, what is the right forum to ensure that the builder does not flout the ST/VAT rules laid down by the government? Are there specific judicial departments to complain to in such scenarios?

Appreciate your valuable thoughts, inputs and guidance.

Best Regards

Rakesh

Originally posted by : MJ Krishnamurthy
	Miss Neha:, Generally, a builder charges on land cost,construction cost,adavnces to Beascom and BWSSB,corpus  fund for association, club membership etc.,First they quote basic rate per Sq Ft .This is called as basic cost and includes land cost also.Normally,car parking is just an open space earmarked for each apartment with white paint.VAT liability is on transfer of property(material)  and ST is related to services rendered in a construction.So,out of the basic cost you have to reuce the land cost(normally 40%) to get the construction cost.In Bangalore most of the builders collect 4% VAT and 4.12% ST on the construction cost.In fact,even this is higher than what they pay to the govt.This is the rate of composition scheme.But builders pay at normal VAT scheme,which works out to 2.5%(appx) after availing Input credit. ST @ 4.12% on construction cost is nearly correct. Adavances to bescom and and bwssb are payable to those departments(not fully),and not amounts of any sale or service.Therefore VAT and ST are not applicable.Similarly corpus fund and club membership are not taxable. None of the general facilities are sold to you and not taxable. On these points now you work out your actual liability.....mjk

Iam also in a situation where the builder says he has VAT and ST already and asking to pay now, before registration saying that would help him to complete the flat. Reason being given is has not money as he has paid VAT/ST in advance.

With this back ground I have few questions:

1. VAT/ST needs to be paid at the time of registration or any time to builder?

2. Builder is expecting us to pay 8% on total value of the sale value of the flat, is it correct way of assessing the VAT+ST?

3. There is seperate agreement for land and flat. 

4. Builder expectation is that he be paid in cash/bearer cheque not in the name of company, it is correct, the reason being accounting issues.

5. What document we need to get for paying the VAT/ST from builder so that we can be sure the money we paid is accounted to VAT/ST.

Any advise on these matter will help to take further course discussion with the builder. Thanks for your advise in advance

Sir

I have been sucessfully running proprietory business in Bangalore since 1993, now Iam nearing 60 years I would like to transfer ownership under karnataka VAT registration to my  son who has associated with me for past few years.

Please guide.

Thanking you,

Sreenivas

Hi All,

I am buying an apartment from the builder. It's ready to move (completion certificate is already obtained). He is not charging me any service tax. But he is saying that i need to pay VAT to the government as registration will not happen without that.

I've explored this on websites and found everywhere that VAT is only applicable on under construction apartment. I've sent the website links to my builder but he keeps saying that registration office is not registering without paying the VAT.

Can anyone throw more light on this?

Dear all,

I had received bill from Vendor is charging 9% KVAT on works contract without any bifurcation of amount from banglore, please help me where he get 9% kvat tax composition scheme..

Please do the needful

   Mr P Viswakarma, : This 9% appears to be not correct. However,if you give full details of cost of apartment,other charges,and 9% of what amount, whether it is for VAT only or it includes ST also.etc I can tell you the correct position.......mjk