Tax on purchase of apartment

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Querist : Anonymous

Querist : Anonymous (Querist)

28 September 2011 sir,

Is service tax is applicable on the purchase of an apartment. If yes then at what rate it is charged??

If service tax is applicable then the customer has to pay tax on goverment value which is mentioned on sale deed Or on the market value ..??

Pragnesh

Pragnesh (Expert)
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28 September 2011 Service tax is applicable on purchase of an apartment if building is in under contructions or builder has not obtained CC from government authority. Aprat from this service tax is not applicable.

Service tax will applicable @ 2.575% on agreement value.

Querist : Anonymous

Querist : Anonymous (Querist)

29 September 2011 sir,

thanks for replying. plz do reply for the second part of the question?

secondly, i purchased an apartment in a gated community which would be having 5 blocks and altogther 550 flats. my block is fully completed. is service tax applicable on that??

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 Great question! Here’s a clear breakdown about **service tax on apartment purchase** as per the law around 2011:

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### 1. **Is Service Tax applicable on purchase of an apartment?**

* **Yes**, but only if the property is **under construction** or the builder has **not obtained the Completion Certificate (CC)** from the local government authority.
* If the apartment is **ready for possession** (i.e., construction completed and CC obtained), **service tax is NOT applicable** on the sale price.

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### 2. **At what rate is service tax charged?**

* The service tax rate applicable then was **2.575%** (which includes education cess and secondary cess) on the **agreement value** (the actual sale price agreed between buyer and builder).

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### 3. **On which value is service tax charged — government value or market value?**

* **Service tax is levied on the agreement value** or the actual price paid to the builder, **NOT on government value or circle rate** mentioned on the sale deed.
* The government value (circle rate) is primarily used for stamp duty and registration charges, **not for service tax**.

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### 4. **In your case (gated community, fully completed block):**

* Since **your block is fully completed and presumably has CC**, **service tax is NOT applicable** on your apartment purchase.
* Service tax applies only on apartments sold before obtaining CC or still under construction.

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### Summary Table

| Situation | Service Tax Applicable? | Rate | Tax Base |
| ----------------------------------------------- | ----------------------- | ------ | --------------- |
| Under Construction / No Completion Certificate | Yes | 2.575% | Agreement Value |
| Ready to Move / Completion Certificate Obtained | No | N/A | N/A |

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If you want, I can help you understand **stamp duty and registration charges** as well, which are separate from service tax.

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