Service tax & vat for new flat

With effect from 01.07.2010 any industrial or commercial construction or construction of residential complex will be subject to tax if such complex or part thereof is sold prior to obtaining ‘completion certificate’. Consequently, installment purchases of immovable property will become chargeable to the service tax. There are three different ways of paying service tax in this case. In your case, the builder has treated his service as works contract service where an abatement of 60% on Gross Value is available.Therefore effective rate comes to 4.12%.

Hence service tax is payable only where flats are sold before Completion Certificate is obtained by builders.

As regards VAT on sale of flats, The rate of VAT differs from state to state. Dont know much about Rates in Chennai but to my knowledge an option is available either to pay VAT @ 2% on total building cost or or it could be calculated on item basis. But this needs to be confirmed.