Service Tax @4.12%

Queries 7584 views 5 replies

AOJSM

Student

93 Points Joined October 2008

I just signed up for a duplex house in hyderabad. The actual cost of the house is 50Lacs (PlotCost+CostofConstruction=9,33,000+40,67,000). Now the builder is charging ServTax @ 4.12% on 40,67,000=1,67,560/- and VAT @ 4% on 42,34,560(40,67,000+1,67,560)=1,69,382. The ST+VAT component is totalling to 3,36,942/-. Is this calculation correct??

As per my understanding of ServTax according to this link https://in.rediff.com/getahead/2005/aug/03tax.htm.

The Statement:
"With effect from June 16, 2005, exemption has been provided up to 67% of the gross value of services provided by the builder. Hence, service tax would be charged on 33% of the gross value."

33%*40,67,000=13,42,110/-. So ServTax=4.12%*13,42,110=55,294/-.

1.Is the above (55,294)calculation correct?? If not
pls explain in detail.

2.ServTax is mentioned as 12.36% in all matters, then how come its being charged as 4.12%? On what basis is this figure reached?

3.Am I being charged inappropriately by the builder??

4.When I was talking to another builder he told that VAT was charged at 1% and not 4% and that too it needs to be paid at the time of registration, so he asked me to reinquire again with the builder i'm signing up wiht. This put me in a BIG DILEMMA, as to whether i'm being taken for a ride or is everything fair.

5.My builder is insisting that I pay the ST & VAT by the time of 1st installment release of the bank loan.

6.The house is still under construction (70%complete), so am I still liable to pay ST/VAT at this stage itself or can I pay after taking possession of house, alongwith registration?

Sorry if i'm asking too much, as i'm not familiar with all these terminology. Just started reading articles on these and confused, until I came across this site. I hope my clarifications are answered in best interest of me.

Apologies if i've repeated this post.

Cheers, Sai

Replies (5)

Piyush Jain

283 Points Joined July 2008

The rate of service tax is 12.36%. the statement provides that 67% service of builder will qualify for abaitment. That means only 33% of the service will come under the service tax net or in other words the rate of service tax wiill be reduced to 33% of service tax rate i.e 33% of 12.36% which is 4.12%.

The rate of the VAT is 4%.

The builder is liable to collect & pay ST & VAT at the first release of the bank loan.

I hope this will clarify ur doubts. for any further enquiry you may write to me at fcapiyush @ yahoo.co.in

Piyush Jain

AOJSM

Student

93 Points Joined October 2008

33% of (4067000)=13,42,110

Now, ST on 33% = 4.12%(13,42,110)=55,294

I'm not clear, so once again. Is VAT calculated @ 4% on (40,67,000+1,67,560), is this correct? I hope am clear in the figures? i.e., 4%(grossvalue+ST). That is how the builder is charging.

Thanks

Ajay Panigrahi

Service

21 Points Joined November 2007

In abatement scheme service tax will be charge 12.36% of the abated value i.e. 33% of works done and under composition scheme of works contract service service tax will be charged 4.12% of the total works done. VAT will be 4% of Rs. 40,67,000. I hope this will clarify ur doubts.

Guest

427755 Points Joined August 2012

Dear friend,

For eample in your case

construction of house by builder (inclusive material & Labour charges) = 100-00

Where builder bill against you by opting 2 procedures as follows:

1) sepertly on material VAT 4% +Add tax 1% and against labour charges ST 12% + add tax 4%( equlent to 12.48%)

2) On total billed amount considering 33% and againast same charging ST 12.48%(It is equalent to 4.12% charged against total value)

Rgds,

Imam shaikh

Originally posted by :AOJSM

Thanks for the reply. But 33% of 12.36%=4.07% & not 4.12%. Pardon my ignorance, if i missed out anything. Once again I want to confirm & clear my conscience regarding the statement I quoted "service tax would be charged on 33% of the gross value":here in this case: gross value=4067000
33% of (4067000)=13,42,110
Now, ST on 33% = 4.12%(13,42,110)=55,294
I'm not clear, so once again. Is VAT calculated @ 4% on (40,67,000+1,67,560), is this correct? I hope am clear in the figures? i.e., 4%(grossvalue+ST). That is how the builder is charging.
Thanks

pankaj

Taxation expert

63 Points Joined September 2007

For standardization in fixing service tax, 1/3rd sale price is considered for levying service tax, which is assumed to be the portion of sale price, where the builder/contractor takes services from others. Hence 1/3rd of applicable service tax of 12.36%, makes the effective service tax scale to 4.12%.

With the interim budget making service tax - 10.3% (10% service tax and 3% cess), it will now be 3.43%