Is VAT calculated on GrossValue only or (GrossValue+ServTax)

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AOJSM (Querist)
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28 November 2008 I recently bought a independent house. The total cost of the project is 50Lacs, and the breakup is as follows:

Plot Value=9,33,000

Cost of construction=40,67,000 (Gross Value)

The builder is charging me Service Tax @ 4.12% on (40,67,000)=1,67,560/- (Compounded Rate). Why cant he charge at Normal Rate i.e. @ 12.36% on (33%*4067000)=12.36%(1342110)=1,65,884/-. The difference between Normal Rate and Compounded Rate being 1,676/-. Not that its a huge amount, but for my clarification. Would someone shed some light on this ?

Coming to the Main point, the builder is charging me VAT on (GrossValue+ST) as follows:

4%(4067000+167560)=4%(4234560)=1,69,382/-

Is the above calculation correct??? I was under the impression that VAT @ 4% is calculated on Gross Value only, but the builder is including the ST component in this calculation.

So which calculation is right? VAT@4%(GrossValue) or VAT@4%(GrossValue+ST)?

The difference between 4%(GrossValue) and 4%(Grossvalue+ST) is working out to Rs.6702/-. Hence I need the clarification. So can anyone enlighten me on this issue??

Thanks.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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28 November 2008 The builder had opted for compounding under service tax ie why he charged 4.12%.

VAT calculation method of the builder is wrong. In other words your understanding is correct.

AOJSM

AOJSM (Querist)
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28 November 2008 Thank You Mr.Warrier for your prompt reply.

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