Service Tax@4.12%

This query is : Resolved

AOJSM (Querist)
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18 October 2008 I just signed up for a duplex house in hyderabad. The actual cost of the house is 50Lacs (PlotCost+CostofConstruction=9,33,000+40,67,000). Now the builder is charging ServTax@4.12% on 40,67,000=1,67,560/- and VAT@4% on 42,34,560(40,67,000+1,67,560)=1,69,382. The ST+VAT component is totalling to 3,36,942/-. Is this calculation correct??

As per my understanding of ServTax according to this link https://in.rediff.com/getahead/2005/aug/03tax.htm.

The Statement:
"With effect from June 16, 2005, exemption has been provided up to 67% of the gross value of services provided by the builder. Hence, service tax would be charged on 33% of the gross value."

33%*40,67,000=13,42,110/-. So ServTax=4.12%*13,42,110=55,294/-.

1.Is the above (55,294)calculation correct?? If not
pls explain in detail.

2.ServTax is mentioned as 12.36% in all matters, then how come its being charged as 4.12%? On what basis is this figure reached?

3.Am I being charged inappropriately by the builder??

4.When I was talking to another builder he told that VAT was charged at 1% and not 4% and that too it needs to be paid at the time of registration, so he asked me to reinquire again with the builder i'm signing up wiht. This put me in a BIG DILEMMA, as to whether i'm being taken for a ride or is everything fair.

5.My builder is insisting that I pay the ST & VAT by the time of 1st installment release of the bank loan.

6.The house is still under construction (70%complete), so am I still liable to pay ST/VAT at this stage itself or can I pay after taking possession of house, alongwith registration?

Sorry if i'm asking too much, as i'm not familiar with all these terminology. Just started reading articles on these and confused, until I came across this site. I hope my clarifications are answered in best interest of me.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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18 October 2008 1)First para method is wrong.
ST @4.12% on Rs.4067000/- alone and not on Rs.4234560/-
2)Clause 1) is wrong because
ST is either @ 12.36% on Rs.1342110/-ie at normal rate or @ 4.12% on Rs. 4067000/- at compounded rate.
3)Yes subject to 1) above.
4)Not answering due to lack of knowledge on this point.
5)Builder is right.
6)Pay from time to time.

AOJSM

AOJSM (Querist)
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18 October 2008 In continuation to the reply:
1) I would like to mention that VAT is being calculated at 4% on 42,34,560. Is this CORRECT? I think it was misread bcos of too many nos. in the para. ST was calculated the same way as u mentioned rightly in point 2.
2) Pardon my ignorance, y should the builder charge ST@4.12%(1,67,560), and not ST@12.36%(1,65,884), difference between the two amounts being 1,676. Not that a huge amount difference, just for my understanding.
3) U've suggested that I "pay from time to time". Can u elaborate on it.He is asking me to pay upfront, the ST & VAT amount. I just realised, did u mean I can pay ST/VAT in installments?
4) Any idea as to whether VAT percentage charges have been revised lately from 1% to 4%? Cos I dont want to post the entire thing in VAT section , as it would repeat the posting and it would be condemned.
5) Where can i post queries regarding registration of house? Though not relevant, maybe u or anyone else can guide me in the right direction.