10 March 2014
Dear All Experts! I'm looking for your Your valuable views on the below mentioned topic.
I have purchased a flat measuring 700 Sq. ft super built-up area for Rs.14Lacs from a builder. Cost of Registry & Stamp Duty has been borne by me additionally.
The construction of the flat was completed before September 2008 & the Completion Certificate of the same was obtained from Kolkata Municipal Corporation by the builder on 30th September 2008.A copy of which has been provided to me by the builder.
I have made payments to the builder for the purchase of the flat in different spells starting from 31st January 2011 & the last payment was made on 1st January 2014 through Bank Home Loan.
I started residing on the flat from 1st January 2014 in respect to the possession letter received from the builder dated 26th December 2013.
Now the builder is claiming Service Tax @ 12.36% on 25% of the sale consideration value.
My question is- 1. Am I liable to pay Service Tax for the same purchase? 2. Is Service Taxability arise in this deal?
25 July 2025
Great question! Let me break down the service tax applicability on your flat purchase:
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### Key facts:
* Flat size: 700 sq. ft super built-up * Purchase price: Rs. 14 Lakhs * Construction completed **before Sept 2008** (Completion Certificate on 30 Sept 2008) * Payments made between Jan 2011 and Jan 2014 * Possession started Dec 2013 / Jan 2014 * Builder charging service tax @ 12.36% on 25% of sale consideration
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### Service Tax on sale of flats – What the law says:
1. **Service tax on sale of under-construction flats applies only if:**
* The agreement for sale is entered **after June 1, 2010** (when service tax on construction services became applicable). * The construction is **not completed** before that date.
2. If the **construction was completed before June 1, 2010** and the builder had obtained a completion certificate before this date, then:
* **No service tax is applicable on the sale of the flat.** * The transaction is treated as a sale of an immovable property, which is outside service tax ambit.
3. Since your flat was completed before Sept 2008, this falls in the category of a **completed property**. So:
* Even though you made payments after 2010, the construction date is key for service tax applicability. * Hence, **service tax should not be charged** on the sale consideration.
4. The **builder charging service tax on 25% of sale consideration** is likely applying the provisions for under-construction flats (where the service tax is charged on 25% of consideration as a proxy for service value), which **should not apply here**.
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### Your liabilities:
* You **are not liable to pay service tax** on this purchase as per the law. * If you have already paid or been charged, you can request the builder to revise the invoice or provide a credit note. * Stamp duty and registration charges are outside service tax.
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### Summary:
| Criteria | Your case | Service Tax Applicability | | ------------------------------ | ----------------------- | ----------------------------------- | | Completion certificate date | Sept 2008 (before 2010) | No service tax | | Agreement date | After 2010 | No service tax (completed property) | | Builder charging 12.36% on 25% | Incorrect | Should not charge service tax |
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### References:
* CBEC Circulars on service tax on construction services * Finance Act amendments on service tax for construction * Various tribunal rulings stating service tax not applicable on completed properties
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If you want, I can help you draft a letter/email to your builder to contest this charge or advise on next steps. Would you like that?
CAclubindia
