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Service tax & vat for new flat

Queries 1887 views 1 replies

KARTHIKHEYAN

Manager

36 Points Joined September 2011

Hi all. I have booked a under construction flat from a reputed builder in chennai. He quotes the basic rate per sqft for the flat as Rs.3000/= (which include Land & building cost) for a 2BHK. He gives the split up for car parking , EB, drainage, and other amenities waht he is providing. additionally He is stating that the serive tax of 4.12% and VAT of 5 % Is charged for the flat which i have Booked. Can any one suggest me how this service tax of 4.12% is charged and form which cost it is caluclated. Like wise kindly clarify how this VAT of 5% is charged and form which cost it is calculate and on what % it is taken for both.

Thanks.

M.S.KARTHIKEYAN

Replies (1)

CA Prabhat Gupta

Manager (Indirect Taxes)

821 Points Joined January 2011

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.