Service tax and vat on under construction property

Queries 2761 views 2 replies

TaxVictim

Employee

24 Points Joined October 2012

Many topics answered but my query is particular. Please do not overlook :(.

I have purchased a flat in Feb 2011. 5th floor slab and brickwork already completed when I booked i.e. 67% work already done. I made payments as below:

4.2.2011 - 100000

1.3.2011 - 100000

14.3.2011 - 50000

14.5.2011 - 1250000 (Paid by bank on builder demand letter)

11.6.2012 - 500000 (Paid by bank on builder demand letter)

28.6.2012 - 100000 (Paid by bank on builder demand letter)

I have not yet paid the service tax and VAT.

May queries are:

1. On what amount I need to pay Service Tax, since builder is asking taxes on Agreement cost + MSEB + Maintenance Charges

2. On what amount I need to pay VAT, since builder is asking on Agreement cost + MSEB + Maintenance charges

3. Builder is asking flat 3.09% Service Tax on above amount, do I need to pay service tax @ 3.09 % or the rate applicable on the date I made payment?

4. Am I liable to pay Service Tax on the construction done before I booked the flat i.e. 67% already completed and I paid around Rs. 1500000?

Kindly answer my query and provide govt circular reference or any other form which clearly justifies the answers. Builder is not listening to me and asking me to pay what he is asking.

Replies (2)

S Gupta

Finance Manager

92 Points Joined June 2012

Hi

If u registered the property as fully finished then the tax rate 3.09% on entire sale consideration (exluding the amenities etc).

if you registered the property as semi finished then the tax rate on sale deed value at 3.09% and 4.944% tax on construction agreement value.

To know the liability under VAT and ST Actsyou should arrive at the construction cost. The total cost paid for a flat includes land cost (30%), charges for amenities and payments to agencies like MSEB,Waterboard,registration,security etc. (10-15%)As seen normally these exempt items( from both VAT and ST) form around 50-55% of the total price. The construction cost does not exceed Rs1.2 to 1.5 lakhs per 100 sq ft area of a flat. On the construction cost 4% VAT is applicable under composition scheme. Most of the builders go by composition scheme only. Similarly,a composite scheme is possible under ST Act. @ 4.12%.Othrwise VAT is applicable @ 12.5% on around 60%(material cost)(70% in many states)and ST @ 12.36% on 40% of the construction cost You may insist on the builder to give the break up of the price .The builder has to issue an invoice to collect both VAT and ST as per rules.Just cash receipts are not sufficient. As per latest scheme a builder can also pay 1% VAT on the entire recipts without showing the break up ,and collect the same from flat buyers.Now put all these points before him.If he still demands a wrong amount as VAt or ST you may get a lawer's notice also issued,to expalin clearly or face litigation. Even though a flat has been booked during its construction one has to pay tax on the entire price........MJK