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

This query is : Open

AOJSM (Querist)
Follow

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)
Follow

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)
Follow

28 November 2008 Thank You Mr.Warrier for your prompt reply.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now