Tax rate

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mangesh

mangesh (Querist)
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01 November 2013 what is vat rate and service tax rate on newly constructed flat?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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04 November 2013 VAT is applicable on sale of goods and commodities. Immovable property is not goods nor is its transfer governed by the provisions of Sale of Goods Act, 1930. Therefore on transfer of land & buildings (including flats) no VAT is leviable.

Service Tax is leviable on services rendered during construction period by the contractor till the issue of Completion Certificate by the Municipal authorities. Once the CC is issued, no further service tax is leviable on the amounts realized by the contractor. The rate of Service Tax is 12.36%. However, contractors are allowed to avail of abatement as under:
(a) If the price of the land is not included in the sale price of the flat and charged separately, abatement of 67% can be availed and service tax would be levied on 33% i.e. @4.079% of the total consideration;

(b) If the price of the flat is inclusive of land price, then:
(i) If the total consideration is less than Rs.2 Crores and the area of each unit is less than 2000 square feet, abatement of 75% can be availed and on the balance of 25% tax is levied i.e @ 3.09% of the consideration; and
(ii) otherwise the abatement would be 70% and on the balance 30% service tax would be levied i.e. @3.708% of the consideration.

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