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.
Hi,
My Client purchased a Flat & get registered it with Sub Registrar,Raipur. Now Builder charged Service Tax,Vat on it. My query regarding it that it is double taxation.There are 3 parts in a flat- 1) Part Value of Land 2) Material Value ( Metal,Sand,Bricks,cement, Tiles, Switches,granites,Sanitary Fittings,Door,Grills,Steel etc 3) Labour Payment. Sub Registar to take stamp duty on land only. Vat to be charged on Material & Service Tax on Labour payment. Why registrar is taking stamp duty on entire value of flat. Hence no service tax & Vat to be charged on flat. Also as per vat act ,vat to be charged on movable property .i.e. on goods only & not on immovable property. So please clarify me about it.
Dear Sir,
I have booked my flat in March 2010 (Pune),agreement date 18-Marc-2010, However my flat agreement cost is Rs.2630156/-+75000 MSEB+69360 Society Maint=Rs.27,74,516 out of that i have paid Rs.100000/- booking Amount on dated 10-Marc-2010 and remaining Amount i have paid Rs.2,56,440 on Dated:2-Jul-2010 , Rs.1879193 on dated:21-Jul-2010 and amount of Rs.263076/- on dated 23-Dec-2010 and reaming Amount is Rs.275807/- which i will pay this month end, Now builder is asking me for Service tax 2.58% on value which i have paid after 1st of July 2010. Could you please tell me is it necessary to pay Service tax on Amount paid after 1st of July 2010? Almost all work is completed and Builder will give possession January 2011.
Please reply…..
Sagar S
Hi,
I booked a flat on Sep 2009 for 21 lakhs and paid 8 lakhs to builder in the month of Feb 2010 and remaining full amount in the month of Sept 2010, now could you pls assist me how much is the service tax and VAT is applicable. please suggest
Thanks,
Sunil.
Sir, i had booked a flat at Patna centre in the year2008.I had already paid the majority amt.(almost 80 %)in the year 2009. Now i have paid the remaining 20% amt in the month of Dec.2010. The construction work is almost completed. Registration of the flat by the builder in my name, at Registrar office,Patna was done on 1/12/2010. Now the builder is insisting for payment of servie tax.Pl clarify:
Whether service tax is to be paid by me?
If it is payable, please specify on which amt.(Either on 100 % or on 80 % or on 20%).
Regards, V V Bharadwaj,State Bank Of India,Region-1,Administrative Office, Patna
Sir,
I booked a flat in Jan 2010 for a aggreement value of Rs. 38 Lacs. I already paid 10 Lacs amount before Jul 2010. COnstrunction for this has been started in Oct 2010. Now Please tell me on what amount I need to pay service tax.
Regards
Naval
Dear Sir, I have Booked my Flat on March 2010 & Stam Duty & registration is done on April 2010.My flat pocession is on December 2010 & balance 15 lacks payement is done after 10 July 2010.So pls guide me that still I have to pay service tax.
dear sir
i book flat in aug 2009 & got register on dec 2009 & i m getting possession in jan 2011 so i have to pay the tax or not
Hi – I have dove the Sale and Construction Agreement in month of March 2010. My Builder still expecting Service Tax from my side. I don’t understand why do I pay Service tax if I have booked Flat before “JULY 2010”?
I read an article that saying “Book under construction flat before July 2010 to avoid 3.30% service tax on Agreement value”
Please help me…..
I have purchased a flat in chinchwad pune in aug2010. at the time of buying there was no descussion made on service tax from builder. now he is asking post dated check for service tax. kindly guide me what to do?
I booked a flat on september 2010 and payment made on march 2010 through financial institution by taking a loan.hence guide me regarding applicability of service tax from 01 july 2010.
Thanking you
I have purchased a house in Pune. After purchasing I also paid service tax & VAT amount (Around Rs64000/-) to builder.
How I will be confirmed whether builder will deposit or not?
Govt. should clear all rules before implementaing new rules.
Request for a suitable reply.
Mob. No. – 099 7000 6493
sir, I have booked the flat on dec. 2009 which is Token amount of Rs. 21000/- and my agreement on 10 th march 2010 will i be charged service tax or not? flat r under construction and possetion on april 2012
Dear Sir.
I have booked a flat in Oct 2009, the registration was completed in April 2010.
However since Oct 2009 I have paid 4 installments, the balance 5 are still to be paid. Do the balance 5 installments carry a Service Tax since the registration was completed in April 2010.
Tax,Tax,Tax and Tax how many taxes are we supposed to pay to these ruthless,shamless & corrupt Goverment . Actually I can understnad incompetency doesn’t leave much of options so there has to be some ways & means to collect hard earened money out of the customers.
Plz carry on till a common man doesn’t commit suicide or kill someone who comes out with these brilliant & dynamic ideas
God saves us from these Ruthless , heartless demons & Monsters
I have purchased flat in apr 2010 and it is under construction. Possesion will be in Feb 2011. The registration was completed in apr. I want to know that whether service tax will be applicable to me as well.
Sunil,
You need to pay ST on payments made after 1st July’2010.Its only on remaining agreement value. Also right now there is stay by Mumbai High court. So will suggest not pay the ST till final decision comes.
Dear Sir.
I’ve purchased a flat in Pune and my agreement amt is Rs. 4500000. The agreement has been made on 09 june 2010. Almost 50% of the payment has been done by me. Now the builder is asking me to make the payment of service tax and VAT. Can you please mention how much service Tax I need to Pay?
Dear Sir,
i had booked flat in Nov 2009 & that time i had paid 15% amount as a booking advance after that in last month demand letter receved from builfder & ie charge service tax plz guide it is liabilie to me
need guidance
I have booked a flat on 25th May 2010.My property is under construction and the possession is due by September 2010.
The agreement value of the property is of 19.00 Lac. I paid 51000 and 1,81,000 in the month of June.
Now my builder says that I need to pay VAT of 1.5 % on agreement value and service tax of 3.3% on agreement value.
I have invested all of my money in down payment and rest I took loan from LIC.
Please help me by providing me information on VAT and SERVICE TAX.
Kindly suggest me what do I need to do.
hi,
i had booked a flat in july2010.
but builder ask me for more tax service & vatt, can you tell me how much tax more i have to pay.My flat agreement amount is 30lacs.
Thx
Asmita
Shall service tax be applicable if duplex is booked by me in Sept. 2009, Registered Banakhat executed in June 2010 ; Sale deed likely to be executed in Dec. 2010 and possession likely in Jan. 2011.
I have booked flat in Jan2009,& still flat is underconstruction,The 10% amt is due to me,Wheather the service tax will be applicable on remaining amt ? how much it will be?
Sir, i booked the underconstrution flat 21 feb2010 registered the same on 11.march 2010 and taken home loan on 31 April2010.part paymenti have given and further from home loan.i will get the flat in Dec2011.stagewise payment will pay from the loan.
So will I have to pay tax for the part payment. Please respond
When english ruled over india, they imposed tax on just salt, and our mahatma decided to do a dandi march, in this modern world we need another Gandhi, Evereything is now taxable. The air which we breathe will also come under tax in next few years, there will be a meter on everyone’s face which will measure the oxygen and air which we breathe, and we will have to pay for that air, not only that the carbon di oxide which we give out in breathing process will also be taxable.
Jaago Grahak Jaago
MAHESH PATEL I booked flat JANUARY 2010,i had given 2,20,000 by cheque to builder, but i will do my agreement on 3RD july.
It will comes under service tax & VAT Please clarify to me.IF YES THEN HOW MUCH PERCENTAGE I HAVE TO PAY? IT IS ON AGREEMENT VALUE OR WHAT?
Read more: https://www.taxguru.in/service-tax/book-under-construction-flat-before-july-2010-to-avoid-3-30-service-tax-on-agreement-value.html#comment-71338#ixzz0tFouEBNk
Dear all,
I had purchased a new flat in kothrud area on april 2009. I want to know about service tax rules.
please clarify.
I booked flat may 2010,i had given 150000 by cheque to builder, but i will do my agreement on 15th july.
It will comes under service tax & VAT Please clarify to me.
To correct and be read – ‘Post of March 6’ (not 13th March)
vswaminathan
It is mind boggling and quite confusing as to why this Post of 13th March again figures in the latest update. Though, so far as one is aware,the then indicated exemption of bookings before the effective date (since announced – 1st July 2010) from service taz seems to have been given the go-bye.
I am open to correction should my above understanding be incorrect!
vswaminathan
In today’s scenario Govt is playing a bias role. On one hand they are saying of introducing low cost housing and on the other hand they are leving such taxes viz., VAT & Service Tax. Why don’t they look at other avenues of raising the fund for the bankrupt Govt. Such as reducing their own exps or introducing of Solar energy in all Govt. depts in order to reduce electricity exps.
I have booked a flat in 20 June 2010 with Amount of Rs. 1,00,000/-Kindly clarify whether i will be charged service tax & vat?
I have booked the property on 27th Jan 2010 and had Agreement on 17th March,2010.will i be charged service tax or not on the remaining flat amount?
Sir, I have booked a flat in Hyderabad, Andhra Pradesh which is under construction and registered the same on 29th December 2008. I don’t know exactly whether the builder has obtained the possession certificate from the Government authorities or not. But, I have released full amount and my flat is ready to occupy. My question is shall i pay the Service Tax which is newly introduced by the CBEC.
I have booked the property on 28th june 2010 which is Token amount of Rs. 45000/- will i be charged service tax or not?
Has the new Service tax on flat purchases been notified in CBEC?
Only queries raised here, but no one has answered for any of these queries.
I had booked a flat measuring 1033 sq ft in 2006 and the builder now says that i have to pay service tax. It will be refunded if not applicable. The flat is likely to handed over to me in june/2010. Do i
need to pay any service tax?
I booked a under construction house on Aug 2009 and pocession is by Oct 2010. Do i need to hurry up my registration by paying the complete amount to builder.
Hi,
I have booked a under construction flat in Vasai last week,for which i have already paid the builder the signing amount of 20%. I have also done the franklin & have remove the pay order to make the registration,however the agreement is not yet made by the builder. Since i want to get the registration done fast to avoid service tax i have made the payment by cheque,the builder has give me the receipt for the payment done,however i just want to know when are the service tax going to be Implemented.
Aside what documents should i ask the builder apart from the receipt since the agreement is yet to be made.
Service Tax, Stamp duty, registration & Vat impossible for every one.
Hi,
I stay in Mumbai.
I agree to the fact as all have stated above already….
Buying a house in Mumbai is a tough task anyways….we have to pinch our stomachs to make our houses…..and the government is further pinching our tummies by doing this additional tax imposing….
At one end, the government gives free houses to slum dwellers in thousands(they have now increased their carpet area to 269sq.ft), and why would they not when they need their precious votes…..and at other end we people already pay taxes of our hard earned money (apart from income tax, remember that all consumables we buy are mentioned as “INCLUSIVE OF TAXES”, which means that tax is also paid in the consumables we buy)and by a house out of our savings…add to that the (stamp duty, registration)
What next????? What will be the new type of tax that these ruthless people ( whom we elect ) impose on us…..
apart from the already hyped flat cost (that is charged not on carpet but on super-builtup), we pay the stamp duty, registration charges and now these….
Just wonder, if all of these guys who set rules for us follow the rules themselves….do they pay taxes, income taxes too???
— Ar. Poonam Naik
Hi,
I have booked a flat in Pune, and also registered in feb 2010. There part payment due which I will pay by Home loan. The home loan may take time and may spill 31st march deadline. So will I have to pay tax for the part payment. Please respond
Hi,
I have booked a flat in Pune , having posession on june 2011.
Want to know, will the date of Agreement will make diferrence in the Service tax to be paid for the Under construction flats.
Shall I go for Agreement/ Registration before 31st March 2010?
Agreement value of my flat is 3100000 Rs.
Can you please mention how much Tax I need to Pay
To purchase a FLAT itself is a very tough decision for a MEDIUM SIZE FAMILY. Now, if SERVICE TAX WILL BE LEVIED, then how can a person think about purchasing a house? NO…. SERVICE TAX should not come into effect.
Immovable property ia a state subject and levying service tax by the centre on flats is unconstitutional and it will only lead to unnecessary litigations.
dear sir, this service tax should be givan effect w.e.f. the date of notification and it should not effect the alred contract execuled
If construction is a service then the stamp duty should be charged only on the undivided portion of land price. But what we have seen in the past that the buiders have charged service tax and also included constuction cost for stamp duty calculation which is not correct.
How many times do they want to tax a particular item and the final burden is obviously on the customer. He has to pay stamp duty, even VAT has to be paid and now this service tax.
The budget says that this is a clarification in existing clause wef 1 Apr 2007. I am expecting house posession in April 2010 where 95% of the payment is made some 6 months back for a house. If you could pls clarify on three things:
1) If its prospective, will it be applicable from July or April.
2) When is the final clarification on booking of flat vs possession expected from govt
3) Suppose its retrospective, I might press builder for early possesion by say 31st March. Can that help in any case
Dear sir
This service should be given effect w.e.f the date of notification and it should not effect the already contract executed.