Service tax on independent villa

Service tax is calculated differently in transactions where the cost of land is shown separately from the services provided. In such a scenario, a buyer has to pay service tax at the rate of 15% on the services provided, and the cost of the land is exempt.

When it is not possible to show the value of land separately from the cost of services provided, service tax authorities provide an abatement of 70% on the gross value of the property.  As a result, you pay service tax at the rate of 15% on 30% of the gross value. The effective service tax outgo on such an under-construction property works out to 4.50%.

The buyer has to pay service tax on preferred location charges (PLC), floor rise charges (FRC), club house, external development charges and the initial maintenance deposit. The brokerage fee, lawyer fees for registration will also attract service tax.