Applicability of vat or st

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 December 2013 Dear Sir,
One of our client is in to the business of purchases of land, divide the land into different plots and sales the same to the clients. The facilities provided by the such plots are water connection, electricity connection, internal roads with street lightning and boundary wall which surrounds the land. Apart from this not doing any construction work. My query is Vat or Service Tax or both applicable or not, if yes than at what rate.

Thanking You.

Querist : Anonymous

Querist : Anonymous (Querist)

18 December 2013 Dear Sir,

Please reply this query at utmost urgent.

Thank You.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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14 July 2024 Based on the description of your client's business, which involves purchasing land, dividing it into plots, and selling those plots to customers along with certain amenities like water connection, electricity connection, internal roads with street lighting, and a boundary wall, here's the applicability of VAT (Value Added Tax) and Service Tax (now GST):

1. **VAT Applicability:**
- VAT typically applies to the sale of immovable property, which includes land and buildings.
- Since your client is selling land divided into plots, VAT may be applicable depending on the VAT laws of your state. In many states, VAT or a similar tax (like GST under the current regime) is applicable on the sale of developed plots of land.
- The rate of VAT/GST applicable can vary by state, and it's important to check the specific rates applicable in your client's state for the sale of developed land or plots.

2. **Service Tax (Now GST) Applicability:**
- Service Tax (now GST) could potentially apply to certain services provided in conjunction with the sale of plots, such as the provision of amenities like water connection, electricity connection, internal roads, street lighting, and boundary walls.
- These services might be considered as 'works contract services' under the GST regime if provided in relation to immovable property.
- Under GST, works contract services are typically taxed at specific rates depending on the nature of the service.

3. **GST Rates for Works Contract Services:**
- For works contract services related to immovable property, the GST rate varies depending on whether the property is affordable housing (with concessional rates) or other types of properties (with standard rates).
- The applicable GST rates for works contract services need to be verified as per the current GST law and rates applicable in your client's state.

4. **Conclusion:**
- Both VAT (or GST) and Service Tax (now GST on works contract services) may be applicable to your client's business depending on the specific nature of transactions and the state in which the transactions are carried out.
- It's recommended to consult with a tax advisor or GST consultant who can provide detailed guidance based on the specific circumstances of your client's business and ensure compliance with the relevant tax laws.

For precise advice and to determine the exact tax implications, including rates applicable under GST for works contract services and any VAT applicable on land sales, seeking professional assistance would be beneficial.

Best regards,

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