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Service tax rate if separate sale and construction agreement

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Govindarajan

CMA

21 Points Posted on 15 June 2015

My builder demolished an Individual house, owned by him, to construct an apartment. I own a 1090 sq ft apartment (UDS 523 Sq Ft) of the total 4, 000 Sq ft built up portion

We entered separate Sale and Construction agreement. Builder is calculating Service Tax on Total Value of the Property instead on. Is it correct?

I was under the assumption that by entering separate agreement, value of Service and Cost of Land is bifurcated, so ST should be only Construction Agreement Value. Please Clarify

Thanks
Govind

Replies (2)

Hari

71 Points Posted on 13 July 2015

If there is separate agreements for sale of uds and construction, service tax is applicable at 40 % of construction value only.

Madhukar N Hiregange

Chartered Accountant

33545 Points Posted on 18 July 2015

Builder has option to pay ST on 25% of full value or 40% of construction value.

Important is that when buyer comes to builder when building is 60% complete- then ST is payable only on 40% of the construction contract as per SC decision in L&T. Most builders however do not avail of this benefit.