I purchased a flat in Hyderabad for a sum of Rs.33.13Lakhs. What is % of service tax on cost of land and work order. Builder is asking me to pay service tax @ 3.09% on cost of land and 4.94% on work order contract. are these rates valid as per the law?
The above facts are not very clear...
A.3.09% (30% x 12.36%) - this effective rate can only be obtained after reducing 70% from the total contract value, and such value be inclusive of cost of land. [Point No.12 of the Notification No.26/2012-ST, amended vide Notification No.9/2013-ST dated 8 May 2013]
B.4.944% (40% x 12.36%) - Such rate arises post application of composition scheme of 40% valuation as per Rule 2A of the Service Tax (Determination of Value) Rules, 2006 which is applicable to a new construction activity.
CONCLUSION - From the above, it may be noted that if the builder's project is consisting of the cost of land, then the liability shall be 3.09%, else it shall be 4.944%. It is not very clear from you statement above, whether the builder is applying the different rates for the same construction contract or separate ones. If these are one, then different rates cannot be applied, otherwise, the builder may be right, based on the above explanation.
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
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