Vat & service tax on flat purchase

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Querist : Anonymous

Querist : Anonymous (Querist)

06 September 2013 I have purchase flat one year before in Ulwe near Navi Mumbai. Now flat is ready to use, builder asking for VAT & Service Tax on that. I have read that there is exemption available for small purchase area. Total 16 members in new building, have I need to pay both tax in this case?

Querist : Anonymous

Querist : Anonymous (Querist)

18 December 2013 I have purchase flat one year before in Ulwe near Navi Mumbai. Now flat is ready to use, builder asking for VAT & Service Tax on that. I have read that there is exemption available for small purchase area. Total 16 members in new building, have I need to pay both tax in this case?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 Great question! Here’s a clear breakdown regarding VAT and Service Tax on Flat Purchase in Maharashtra (Navi Mumbai area like Ulwe):
1. VAT on Flat Purchase (Sale of Property)
Applicability:
Builders charge VAT on the sale of under-construction flats (value of construction materials, labor, etc.).
Once the flat is ready for possession (i.e., construction complete and occupancy certificate granted), VAT is usually not applicable on further sale (like resale).
Exemptions:
Maharashtra provides VAT exemption or concessional rates for flats below a certain size (typically up to 500 sq.ft or as per govt. norms).
Also, if the total number of flats in the building is less than a certain number, exemptions may apply.
2. Service Tax on Flat Purchase
Applicability:
Builders charge Service Tax (before GST) on the construction service portion for under-construction flats.
Service Tax is not applicable on resale of completed flats.
When to pay Service Tax:
If you purchased the flat when it was under construction, builder should have charged Service Tax at that time.
Now, if possession is given and the builder is asking for more tax, it depends on contract terms.
3. Your Situation:
You purchased the flat one year ago (presumably under construction).
The flat is now ready for use.
Builder is asking for VAT & Service Tax now.
4. Points to Check:
Was VAT and Service Tax paid at time of purchase?
Usually, VAT and Service Tax are payable during the under-construction phase, billed progressively.
Exemption based on flat size:
If your flat is small (under approx 500 sq.ft), you may be eligible for exemption or lower VAT rates.
Number of flats:
You mentioned 16 members in new building; in some cases, exemption applies if the building is small in terms of number of flats, but check exact Maharashtra VAT rules.
Demand for VAT and Service Tax at possession:
Builders sometimes raise final demand on balance payments. You should ask for detailed tax break-up and proof of taxes already paid.
5. Summary
Tax Applicability Your case (Ulwe, Navi Mumbai)
VAT Charged on construction phase Should have been paid during construction. Check if exemption applies on small flat size.
Service Tax Charged on construction service Payable on construction phase, not after possession. Confirm with builder if any balance outstanding.
6. What should you do?
Ask builder for a detailed invoice showing VAT and Service Tax charged earlier and now.
Verify if VAT exemptions on flat size apply to you.
Consult a tax professional or Maharashtra VAT department for exact applicability.
If you believe taxes are wrongly demanded now, you can challenge with proof of prior payment or exemption.

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