Service tax in real estate
This query is : Resolved
19 February 2014
If any builder sold a furnished flat and separate sale agreement is made for flat & furnishment.
then what will be the service tax rate on furnishment value.
Abatement of 75% will be allowable or not?
Means ST rate will be 12.36 % or 3.09%(after abatement)
then what will be the service tax rate on furnishment value.
Abatement of 75% will be allowable or not?
Means ST rate will be 12.36 % or 3.09%(after abatement)
20 February 2014
NO ST if sale is made after receipt of completion certitifcate.
20 February 2014
Both Agreements are done before completion & consideration also received before completion.
24 July 2025
Thanks for the details! Here’s a clear explanation for your situation on **service tax on furnished flat sale with separate agreements for flat and furnishing**:
---
### Key Points:
1. **Sale of flat (real estate) before completion certificate:**
* Service tax is **payable on the entire amount received** from the buyer, including the furnishing value, **if the sale happens before receipt of the completion certificate**.
* This is because the activity qualifies as **“construction service”** or **“works contract service”**, both taxable services under service tax.
2. **Abatement on service tax for construction/works contract:**
* Builders get a **40% abatement on service tax for construction/works contract services**, so the effective rate is **12.36% x 60% = 7.416%** on the taxable value.
* The **75% abatement** is generally **not applicable** for furnishing, as it is treated as a separate service (supply of goods or interior decoration service), **unless the furnishing is integrated into the construction contract**.
3. **Sale of furnishing separately:**
* If furnishing is sold separately (separate agreement, consideration), then it is a **supply of goods** or **interior decoration service**.
* Service tax on furnishing (if charged as service) is at the **full rate of 12.36%** without any abatement.
* If it is supply of goods (furnishing items), then **no service tax** but possibly VAT or GST depending on current law.
4. **If sale is after completion certificate:**
* No service tax on construction services (or works contract) since the construction is complete.
* Separate furnishing sale may be liable to VAT/GST but not service tax.
---
### Your Case:
* Since both agreements (flat + furnishing) and payments are made **before completion certificate**, service tax is payable.
* For the flat, builder gets **abatement of 40%**, so service tax is on 60% value.
* For furnishing (separate agreement), **no abatement** is allowed, so full 12.36% service tax applies on furnishing value **if furnishing is treated as a service**.
* If furnishing is considered supply of goods, no service tax applies on it.
---
### Summary Table:
| Item | Service Tax Applicability | Rate/Abatement |
| ------------------------------- | --------------------------------------- | ------------------------------------------------- |
| Flat (before completion) | Yes (construction/works contract) | 12.36% on 60% of value (40% abatement) |
| Furnishing (separate agreement) | Yes, if furnishing service; No if goods | 12.36% full rate (no abatement) or no ST if goods |
---
If you want, I can help find the specific notifications or circulars on this. Would you like that?
---
### Key Points:
1. **Sale of flat (real estate) before completion certificate:**
* Service tax is **payable on the entire amount received** from the buyer, including the furnishing value, **if the sale happens before receipt of the completion certificate**.
* This is because the activity qualifies as **“construction service”** or **“works contract service”**, both taxable services under service tax.
2. **Abatement on service tax for construction/works contract:**
* Builders get a **40% abatement on service tax for construction/works contract services**, so the effective rate is **12.36% x 60% = 7.416%** on the taxable value.
* The **75% abatement** is generally **not applicable** for furnishing, as it is treated as a separate service (supply of goods or interior decoration service), **unless the furnishing is integrated into the construction contract**.
3. **Sale of furnishing separately:**
* If furnishing is sold separately (separate agreement, consideration), then it is a **supply of goods** or **interior decoration service**.
* Service tax on furnishing (if charged as service) is at the **full rate of 12.36%** without any abatement.
* If it is supply of goods (furnishing items), then **no service tax** but possibly VAT or GST depending on current law.
4. **If sale is after completion certificate:**
* No service tax on construction services (or works contract) since the construction is complete.
* Separate furnishing sale may be liable to VAT/GST but not service tax.
---
### Your Case:
* Since both agreements (flat + furnishing) and payments are made **before completion certificate**, service tax is payable.
* For the flat, builder gets **abatement of 40%**, so service tax is on 60% value.
* For furnishing (separate agreement), **no abatement** is allowed, so full 12.36% service tax applies on furnishing value **if furnishing is treated as a service**.
* If furnishing is considered supply of goods, no service tax applies on it.
---
### Summary Table:
| Item | Service Tax Applicability | Rate/Abatement |
| ------------------------------- | --------------------------------------- | ------------------------------------------------- |
| Flat (before completion) | Yes (construction/works contract) | 12.36% on 60% of value (40% abatement) |
| Furnishing (separate agreement) | Yes, if furnishing service; No if goods | 12.36% full rate (no abatement) or no ST if goods |
---
If you want, I can help find the specific notifications or circulars on this. Would you like that?
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