Regarding completion certificate of flat

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2013 Dear Sir/Madam,

I have following queries--

1-I want to know whether i am liable to pay service tax of 3.09% to builder for purchase of a flat that is fully constructed.

2-Also provide the scope of construction as per the service tax act.

3-Whether the flat completion certificate is required for possession or not where builder is saying that he does not have a completion certificate but already he has given possession to many buyers.

4-Will bank disburse the loan amount without completion certificate?

Thanks..

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2013 Can anybody please clarify my doubts? I am waiting for a quick response. please help me.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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20 July 2025 Here’s a detailed reply to your queries about service tax and completion certificate on flat purchase:

1. Service Tax liability of 3.09% on fully constructed flat
Service tax is generally applicable on construction services provided by the builder.
If the flat is sold before completion, service tax on construction is payable by the builder and usually passed on to the buyer.
For a fully constructed flat (ready for possession), service tax on construction does not apply on sale of the flat itself as it is treated like sale of goods (under VAT/ GST regime).
However, if you are paying the builder for services such as maintenance, clubhouse, etc., service tax may apply on those services.
So, generally, no service tax at 3.09% is payable by you on purchase of a fully constructed flat.
Confirm if builder has charged service tax separately in the agreement.
2. Scope of construction as per Service Tax Act
Construction service includes:
Construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration or remodeling of buildings, civil structures, and other projects.
Sale of an under-construction property is treated as a service (taxable), but sale of completed property is treated as sale of goods (not service).
3. Is Completion Certificate required for possession?
Legally, a completion certificate (CC) is issued by the local municipal authority certifying that the construction complies with approved plans and regulations.
Possession without CC is not strictly legal, but builders often hand over possession before obtaining CC due to delays.
However, possession without CC may lead to complications such as difficulty in obtaining utilities or municipal approvals.
For your own safety, insist on CC or an indemnity clause in the agreement from the builder.
4. Will banks disburse loan without Completion Certificate?
Banks usually require Completion Certificate before disbursing home loans because it assures legal construction.
However, some banks may disburse in phases — part disbursement before CC (based on builder’s progress certificate), balance after CC.
Without CC, loan disbursement might be delayed or denied by the bank.

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