Is VAT calculated on GrossValue only or (ST+GrossValue)

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AOJSM

Student

93 Points Posted on 28 November 2008

I recently bought a independent house. The total cost of the project is 50Lacs, and the breakup is as follows:

Plot Value=9,33,000

Cost of construction=40,67,000 (GrossValue)

The builder is charging me Service Tax @ 4.12%on (40,67,000)=1,67,560/- (compounded rate). Why cant he charge at Normal Rate i.e. @ 12.36% on (33%*4067000)=12.36%(1342110)=1,65,884/-. The difference between Normal Rate and Compounded Rate being 1,676/-. Not that its a huge amount, but for my clarification. Would someone shed some light on this ?

Coming to the Main point, the builder is charging me VAT on (GrossValue+ST) as follows:

4%(4067000+167560)=4%(4234560)=1,69,382/-

Is the above calculation correct??? I was under the impression that VAT @ 4% is calculated on GrossValue only, but the builder is including the ST component in this calculation.

So which calculation is right? VAT @ 4%(GrossValue) or VAT @ 4%(GrossValue+ST)?

The difference between 4%(GrossValue) and 4%(Grossvalue+ST) is working out to Rs.6702/-. Hence I need the clarification. So can anyone enlighten me on this issue??

Thanks.

Replies (2)

Guest

Hello

I think this file can help you

AOJSM

Student

93 Points Posted on 28 November 2008

thank you Mukesh. That was a very good reading, with relevant illustrative examples. I really appreciate your reply, but can you be more elaborate and explain to me what all that document means in a few sentences? I tried reading the document, but somewhere during the reading I got confused and hence would you be kind enough to explain me the GIST of it, relating to my case?

I'm a BUYER, so with Sub-contractor and Principal Contractor, where do I fit??? I'm not a professional in this field, hence the confusion and clarification needed. :)

Thanks once again for the document. I'll take a prinout and read it thoroughly. :)

Cheers.