Follow Us :

Those looking to buy a house would do well to book one before July, when the new service tax levy on construction service will come into effect. The cost of flats will go up 3.3% of the total purchase consideration once service tax begins to be levied on construction.
The government is considering exempting from tax flats booked before the notification of the expanded construction service, a finance ministry official told  “There is a case for giving relief to buyers who booked their houses before the service is notified… We are examining it,” he said.

So, a buyer who has booked a flat but will get possession only after the notification of the new service need not worry. A clarification to this effect may be issued when the tax is notified after the passage of the finance bill, he said.

The Union Budget proposes to expand the definition of construction service and levy tax on houses under construction as well. The new rule, which will come into effect when Parliament approves the budget, says service tax would be imposed if payments were made before the completion of construction.

Realty companies typically sell property before they begin construction and fear that the move will hit the sector hard as it would lead to a rise in home prices and depress demand. “The government must reconsider its decision to impose service tax on under-construction housing as the real estate industry is already paying 14-16% as indirect taxes. The current move will make affordable housing unaffordable in the future,” said the DLF spokesperson.

The government plans to include charges such as development fee, parking fee and premium location charges usually paid at the time of completion of construction in the base price. Only 33% of the base price of the flat will be chargeable to service tax levied at the rate of 10%, taking the effective tax to 3.3%.

“Since an amendment has been made in an existing service already under tax net, there are diverse views whether this will be operative from a specific date after notification or treated as a clarificatory amendment roping in construction-linked payment plans of houses under construction,” said Anil Kumar, CEO and deputy managing director, Ansal API. If it is to be operative from a prospective date, booking a house in the next 3-4 months may result in savings of up to 4% for a customer, he added.

However, the government remains firm on levying the tax. Revenue secretary Sunil Mitra said the proposal would not hike prices by more than 3.5%, an increase that could be afforded by the customers.

“Construction is a service. As a service, there is no reason why it should not be taxed,” he said. “It is only 3% or 3.5% that gets added up (for the buyer),” Mr Mitra added.

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

0 Comments

  1. Rajendra says:

    I have booked my Dupex house on 10-04-12 cost rs.1781000 inclusive all
    I got register in court (Land sale deed )completed house construction before( Dustavej)n 14/05/12
    My question is I am Liable to pay service tax 3.09 % on total amount paid to builder

  2. sophi says:

    Dear sir,
    I HV book a house in 2009, the project is going to get ready now(2014-15). MY builder us asking for service tax. Is service tax applicable for my case. Pls give me proper detail.

  3. S D Kamble says:

    Sir,
    I have purchased a flat in Kharghar,Navi Mumbai.My registration has been done on 9 January 2010 with agreement value 25 Lakh .Builder has send a letter of 5 % VAT i.e.1.25 Lakh.He refused to show us VAT breakup and told us he had charged us on agreement value i.e. 5 %.All our apartment residents refused to pay him. But he has send us a legal notice that we have to pay 1.75 Lakh within 15 days for not paying VAT,other wise legal action will be taken .According to him we have signed the agreement which include that “Any VAT in future will paid by the buyers”,On that basis builder is demanding VAT with penalty.
    So Plz Help us.

  4. Shobhit says:

    Hi,

    I got a quick question, A quick search reveals different answers from different forum

    My question is i bought an under construction apartment in April 2010, I paid about Rs 5 Lakhs before 1 July 2010, Now apartment is ready for possession(Completion certificate of an Apartment should be 2012) , My question is whether i need to pay service Tax on entire amount or have to pay after deducting 5 Lakh?

    Currently i have to pay Rs 80000 as a service Tax however if i deduct Rs 5lakh from total Cost of Apartment(Nearly 40 lakh) i would save approx Rs 10000.Please confirm if i have to pay Service Tax(Approx 4.2 %) on Total value of an apartment or after deducting Money which was paid before 1 July 2010?

    Regards

  5. Ramesh Chandra Senapati says:

    I have booked a flat on April 2012 which is a near completion stage at a tot. cost of Rs 36L. Builder asking me for paying service tax of about Rs.91000/- immediately. When should I pay it. Is it at the time of registration or before registration. If builder delays to pay this tax to Gov. What could I do? Please give me sugession. ……. R C Senapati

  6. vijay says:

    I come to know that service tax is not applicable to OC flat, please confirm and also provide any supporting document, reference please.

  7. manish singh says:

    Dear ,

    Goverment killed the middle man in 5 to 10 years . These middle man alwyas vote for goverment and timely give the tax , so also they charge all kind of taxes only middle man ,,, for middle man 3.5% is also very very big ampount … as per me they should mention above 50-70 lacks purchase only these 3./5 % applicalbe for investing 50-70 lascks person 3.5 % is not worth but for middle man is 3.5% is very big amount and me my three month salary ,,now have goverment run my family three month if i pay these 3.5% tax ..GOVErment sdhould give 6-10 month time to purchaser to arrange this aomunt and pay the govement

  8. Sachin says:

    Hi,
    I did registration of my flat before 31st March 2010. I paid Rs75000 on 9th May 2010 and remaining amount Rs.60500 after July 2010. Now builder is asking for service tax on total Rs.135500 with the rate of 2.58% i.e.3496. Also they say if i pay after 31st Mar 2012 the service tax would be 3.10%.
    Please suggest weather i will be liable to pay the tax as i did registration before 31st March 2010. Also if i have to pay then according to circular service tax will applicable from 1st July 2010 so i paid Rs.75000 before that and remaining amount Rs.60500 in 2011.
    Please advice me.

    Thanks in advance.  
    Sachin

  9. Niteen Agrawal says:

    Hello,
    I have booked and registered a flat in dec 2010. Now builder has given me a letter demanding vat and service tax with interest stating that govt has asked for the same. I have never been asked before that. Should I pay interest to government

  10. vishwa bhooshan nath sharma says:

    hello i have booked my flat on may 2009 @ agreement on 1 sep 2009 for Rs 982000 in badlapur mohan tulsi vihar . I possess my flat on 2 april 2011.How much service tax @ VAT imposed me. The builder demanding me full service tax @ VAT. pls suggest what i do. mob no 9699468117

  11. Bharat Santhalia says:

    hello,

    I need some clarification about these taxes if you can guide me.
    I had booked one flat on 5th June2009  for which I have to pay75% with 2 years and rest of the amount at time of possession. I’m going for 80% loan.
    Now could you guide me that when I have to pay for service tax/vat/stamp duty or if any other taxes.
    And also if having loan also involves any taxes or not??

    Regards

  12. Puneet says:

    Hi Team

    I need some clarification about these taxes if you can guide me.
    I had booked one flat on 20th January for which I have to pay 95% within month and rest of the amount at time of possession. I’m going for 80% loan.
    Now could you guide me that when I have to pay for service tax/vat/stamp duty or if any other taxes.
    And also if having loan also involves any taxes or not??

    Regards
    Puneet

  13. Shankar says:

    Dear Respected Sir,

    Can you please help me in providing your valuable inputs.

    This is regarding the extra charges being imposed by the builder during registration.
    I have purchased a FLAT and agreement was done in Jan 2010 with Possesion Date of Dec 2010.

    My agreement says only to pay 49,11,500/ + (Flat Charges + Maintenance Charges) and 2,00,000/-( Registration+Stamp Duty+Legal Charges) . Now I am asking for registration of the flat and the builder is asking to pay extra Govt. Levies@ 6.5% of 49,11,500 (i.e 3,19,248/-) which is not a part of my agreement. Also he is charging me the late payment
    charges of 2,06,628/- which is because disbursement got delayed from BANK. The builder did not send any
    demand letter to the bank to disburse the amount and there was no progress in the construction.The disbursement was on date basis and not on SLAB completion. The builder planned the dates in agreement in such a way that he knew the Bank processing would delay in disbursing the payment and he is now charging me…Till date he didnt turned up
    saying i need to do the late payment charges but now he is asking me.

    My Agreement was done – Jan, 2010
    Actual Flat Possession Date according to agreement is – Dec,2010 (But Still Not Given)
    Current Situation – Not yet giving Possession Date and demanding more money
    Amount Disbursed – All except 2 L for registration.

    Answer my questions inline to my commments please…

    Answer my questions inline to my commments please…

    Please let me know

    1. What are 6.5% charges? Builder says the 6.5% charges are Govt Levi charges it seems and this charges are separate from the Registration+Stamp Duty+Legal Charges. This figure is NOT at all there in my agreement

    2. Do i need to pay VAT and Service Tax? as i did my agreement in Jan 2010? if so what is the Percentage?

    3. Also should I pay delay charges as there is a delay from builder side as he is not giving possession till date? I have a clause saying builder will pay Rs. 5/sq feet if delayed after Dec 2010. But there isnt any End day mentioned in agreement till what time the delay would be and he hasnt payed anything to me till date.

    4. How much time it would take me to get this legally resolved in karnataka? I heard there are lots of cases pending to be resolved?

    5. He says you happily go to the consumer court there are 12 Lakhs cases pending and it will take years to solve this.

    6. He also says that they have good contacts at builder level…My question is INDIA so corrutped..come on…please help me in getting the right solution..

    7. I cant even concentrate in my personal life as this is the only
    thig i have made in my life and i am not getting this.

    8. Does builder has right to CANCEL agreement?

    9. Should i go to Lokayukta?will Lokayutka help me OR Consumer Court Help me?

    10. He is not Even responding to emails when i Asked about the 6.5% Govt levis charges, as he keeps quiet..

    Please anyone can share me the mail id such that i can send my
    documents and you can verify and provide me the suggestion…

    Answer my questions inline to my commments please…

  14. Rajkumar Subramani says:

    Dear Sir,
    Is this VAT & service tax has been applied or still the final decision is pending to implement it or when final will come to known about s tax and vat.
    i had made the registeration on the month of Feb 2011.
    The builder is asking me to pay the service & Vat tax kindly suggest the property is at panvel.
    please reply as i have to get the possession letter, the builder is not giving me

  15. Vaibhav says:

    Hello,
    I booked my flat in Dec 2009 at price 17 lacs. I paid him 70% loan amount before 31 mar 2010 and now I am pay remaining amount 5.96 lacs. Do I need to pay Service Tax if yes , is that on total amount of Flat sell price or remaining amount loan which is I am going to pay him.

    Please advice.

    thanks

  16. Jay Mehta says:

    Dear Sir,
    I am going to get possession of flat by end of July-2011 in Ahmedabad, Gujarat. Now Builder is asking for service tax.
    Who suppose to pay the service tax builder or me? and what is applicable percentage in Ahmedabad?
    Please reply.
    Thanks
    Jay Mehta

  17. Shukracharya Chavan says:

    dear sir,
    I get the possession of flat before 31jully 2011.
    bulider asking for sevice tax rate 3.5%
    who will pay the service tax builder or me?
    and what is its percentage in jully2011.
    service tax rule is implemented or not by govt. of india?
    Please reply.
    Thanks
    Shukracharya.

  18. Yusuf Patel says:

    i have made full payment of the flat purchase on 30th November 2009, the building is just getting ready and will get the possesion in December 2011,
    secondly the satamp duty and Registration will take place this month June 2011
    should i have to pay VAT and Sevice Tax as Builder is demanding, if yes what rate we will have to pay the same ( VAT + Service Tax)

  19. Shankarsan Parida says:

    I had booked a flate in cost Rs. 925000/- on date 12/08/2009. I had paid Rs.100000/- to builder as booking ammount.the payment of rest ammount is going on in instalment through bank loan.the flate is now under construction.The builder is asking now for servicetax. will I have to paid the servicetax? If yes who wil paid the tax & how much ?
    Please help me by explanig in detail.

  20. jayesh thakkar says:

    sir i have book flat before july 2010 an agreement to sale before july 2010 cost of flat Rs 2000000/- made payment before july first rs 200000/ after 1st july 1800000 is the remaining amout which i pay after 1st july is applicable for service tax of 2.75 %.

  21. Vijay says:

    i booked flat on 19th July 2010 in Noida. my home loan has been approved from Axis bank now bank has been asking me to depoist service tax. do i have to deposit service tax or builder. Is there any rule to deposit service tax. please clarify.

    thanks

  22. charu says:

    Is this VAT & service tax has been applied or still the final decision is pending to implement it or when final will come to known about s tax and vat.

  23. Deepak says:

    Hi,

    I have bought a flat@16,00,000 and made full payment (400,000 my contribution+12,00,000 home loan) in October 2011 as building was completed constructed. I am yet to receive the possession (it is march now). Will I be liable to pay the service tax as I have made the full payment after completion of all the slabs.

    Regards,

    Deepak Sharma

  24. Sheeja says:

    My friend Booked a flat on august 2008 for 26,00,000 including parking charges. But now during the time of registration the builders are asking serivce tax @ 4.12% and in addition to vat 3.03% . Sir please help me how much will all these charges including Registration(5% total value) and other charges will come up to . There is no one to guide her regarding this. Please help us from such builder by providing the correct information. The amount of these charges were not mentioned in the agreement also. As you have mentioned above was this VAT less than 3.3% before July 2010

  25. Ashok Kumar says:

    I booked a flat in Sept 2009 for 21 lakhs and paid 8 lakhs to builder in the month of Feb 2010 and 4 Lakhs in the month of Sept 2010, Now could you please assist, do i need to pay service tax, and on how much amount i have to pay the service tax?

  26. SS says:

    Is this VAT & service tax has been applied or still the final decision is pending to implement it? if it is applicable, are the financial institutions / Banks are willing to pay this amount within sanctioned loan amount limit or even as an addtional component to be paid from customer?

    Thanks

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
June 2024
M T W T F S S
 12
3456789
10111213141516
17181920212223
24252627282930