CA Mukund Abhyankar
Introduction:The issue of the imposition of service tax on construction and sale of residential property has long been a matter of concern for the real estate and construction industry as well as for buyers of such residential property. It has gained much prominence after Budget 2010 because of significant amendment made therein towards taxability of sale of flats under service tax.
A ‘deemed service’ provision has been introduced in case of construction service w.e.f. 1-7-2010. Any industrial or commercial construction or construction of residential complex will be subject to tax if such complex or part thereof is sold prior to obtaining ‘completion certificate’. Consequently, installment purchases of immovable property will become chargeable to the service tax.
Notification no. 24/2010 dated 22 June 2010 has specified the effective date of operation of certain provisions of the Finance Act 2010, which include subject amendment, to be 1 July 2010.
Since the subject amendment is made by way of an ‘Explanation’, added to the Definition of service & since this Explanation is not merely for explaining or clarifying the scope but for expanding the scope of taxable service, it can be safely interpreted that this amendment can not have retrospective effect prior to 1-7-2010.
Following players in real estate sector will get affected by the Amendment.
A pure Developer/Builder, who might have outsourced or contracted out the construction activities to a Contractor, in the case of a civil works contract.
A Developer/Builder cum Contractor, who undertakes the construction himself and consequently doubles as a Contractor.
It needs to be noted however that a contractor engaged by the builder for the purpose of construction of commercial or residential complex is anyway liable to pay the service tax under the relevant taxable category. Dispute was only in respect of the liability of the builder to pay the service tax on sale of a flats during construction to the prospective buyer. Recent amendment brings into service tax net, transactions of sale effected by builders and developers.
Pre-budget 2010 provisions in respect of construction service
Service tax provisions relating to construction cover three types of services –
i. Commercial or industrial construction which is taxable w.e.f. 10-9-2004
ii. Construction of complex (residential complex of more than 12 residential units) which is taxable w.e.f. 16-6-2005.
iii. If sales tax/VAT/works contract tax is payable on these construction activities, related services get covered under ‘works contract service’ w.e.f. 1-6-2007 and not under first two categories of services.
As far as sale of flats by builders is concerned, it was more or less settled, on basis of Court decisions and CBE&C circulars, that a builder entering into contract for sale of flat or industrial unit (gala) or shop or a developer entering into contract for construction of an individual flat for personal residential use of client are not liable to pay service tax.
As a result where agreements are made with the prospective buyers, builders were mostly out of service tax net because in such cases it was considered that no service is rendered.
Changes made in Budget 2010
In the Finance Act, 2010, an Explanation has been added w.e.f. 1-7-2010, to definition of commercial or industrial construction and construction of residential complex, as follows –
Explanation.— For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorized by the builder before the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer.
Similar Explanation is added In case of commercial or industrial construction service, where in place of word complex, the words used are ‘construction of a new building’.
As a result of this Explanation, an activity which is not ‘service’ as per Court decisions and CBEC’s own earlier circulars will now be a ‘deemed service’ for purpose of levy of service tax, under above two categories of services.
Effect of the changed Provisions
It is important to note that extension of scope in the definition of taxable service has been made only in respect of commercial or industrial construction and construction of residential complex service, leaving works contract service un affected by the change.
For the two services covered, service tax will now be payable in cases of sales of flats/shops/galas, unless such sales are made & entire consideration is received after Completion Certificate is obtained for the property sold.
Time for obtaining completion certificate thus becomes a key factor in determining taxability of sales of flats under service tax.
Requirement about Completion Certificate is however somewhat relaxed under the Service Tax (Removal of Difficulty) Order, 2010, made effective from 1.7.2010, whereby it is provided that such Certificate can be obtained either from
1. Any Government Authority including Local Authority
2. An Architect registered with the Council of Architecture
3. Chartered Engineer
4. Licensed surveyor of the respective local authority
Thus even after the amendment, to remain out of service tax net, a builder need not wait for sale of flats till Completion Certificate is obtained from Local Authorities but instead can obtain such certificate from an Architect or Chartered Engineer and can still avoid charge of service tax.
In all other cases, where such completion certificate is not obtained before sale of flats, the builder will be liable to pay the service tax. In most of the cases, builder constructs building by using funds from prospective buyers, paid by them on the basis of Bookings made for major part of such building before its completion. Thus except for few flats reserved for sale at higher price on ready possession basis, for most of the flats sold, service tax will become applicable.
Exclusion of Works contract service from the Amendment
As discussed above, even after the amendment, what is deemed to be a service is only construction of commercial buildings or residential complexes. This is because Amendment inserting Explanation is not made in the definition of works contract service, but only in other two construction related services.
The amendment therefore does not apply if the contract is covered under works contract service i.e. where Vat/Sales tax is payable on the contract.
Thus if a particular construction activity by a builder is covered under VAT provisions, service tax will not be payable on such construction even after the amendment. Pre Budget legal position about non applicability of service tax in case of sale of flats will therefore still hold good even after the amendment in case of works contracts for construction.
Exclusion when construction service is provided for personal use of buyer.
Residential complex for service tax purposes does not include a complex which is constructed by a person directly engaging any other person for designing/planning/construction and is intended for personal use as residence by such person. The definition also explains that personal use includes promoting use of such property as residence by another person on rent or even without consideration.
In this connection, National Building Construction Corporation Limited (NBCC) requested the CBEC for a clarification on the applicability of service tax on construction of residential houses for Central Government employees.
In this case Ministry of Urban Development (GOl) has directly engaged the NBCC for constructing residential complex for central government officers. Further, the residential complexes so built are intended for the personal use of the GOI which includes promoting the use of complex as residence by other persons (i.e. the Government officers or the Ministers).
As such the GOl is the service receiver and NBCC is providing services directly to the GOl for its personal use. Therefore, as for the instant arrangement between Ministry of Urban Development and NBCC is concerned, Board has clarified vide F.No.332/16/2010-TRU Dated: 24, May 2010 (after the Budget 21010 Amendment) that the service tax is not leviable.
In the above clarification, if NBCC and Government are replaced by builder and individual buyer, it would mean that if an individual buyer is buying the property for his personal use from builder, then the transaction of sale is not covered under Service Tax. Clear clarification from CBEC is required on this interpretation, because the clarification referred to above has not been placed by CBEC in public domain.
Transitory provisions in case of bookings made/agreements executed prior to 1.7.2010
Date of booking is not relevant.
Date of provision of service is relevant as provision of service is the taxable event. Hence, if construction service is provided after 1-7-2010, service tax will be payable.
Transitory provisions in case of constructions started prior to 1.7.2010
If the construction is partly complete on 1-7-2010, service tax liability shall be ascertained as under.
Principally, provision of service is the ‘taxable event’, i.e. services provided after tax is imposed will be taxable. Thus, service tax will apply in respect of services provided or to be provided on or after 1-7-2010.
Receipt of payment or advance is not relevant for determining tax liability. Thus, a builder/developer is not liable to pay service tax in respect of services provided unto 1-7-2010. Such bifurcation is possible only if the builder/developer keeps proper accounts and records.
Running bills can be issued in respect of services provided up to 1-7-2010, backed by a Certificate from Architect/Chartered Engineer regarding stage of completion of construction covered by such bills raised.
Transitory provisions in case of advance payments made by the customer prior to 1.7.2010
A specific exemption from service tax has been provided for advances received prior to 1.7.2010 vide Notification No. 36/2010 dt. 28.6.2010. As per Notification service tax is not payable on the amount of advance payment received before the 1.7.2010, for taxable services to be provided, on or after 1.7.2010.
Thus exception has been made for the advances received from the customers before 1.7.2010, even though construction service related to such advances is to be provided after the service has become taxable.
It should be noted however that this exemption is limited to amounts received as advance before 1.7.2010. For all subsequent advances liability will arise towards service tax as per normal provisions.
Service tax is payable on receipt basis and hence as one gets payment for construction service from customer, one has to pay service tax on that amount. If service tax is not shown separately in bill or amount received, the amount received should be taken as inclusive of service tax and then back calculations may be made.
Rate of service tax
Service tax is payable on gross value of taxable services @ 10.3% (Service tax 10%, plus education cess of 2% plus SAH education cess of 1%).
Basic exemption for service tax
The exemption is Rs 10 Lakhs in first year of taxable service counting from 1-7-2010. If turnover in 2010-11 exceeds Rs 10 Lakhs, then there is no exemption and tax is payable on all services from 1st April 2011 onwards.
Valuation of service & Calculation of Service Tax Liability for a Builder/Developer
Principally, service tax is payable on value of taxable services. Thus, if a service provider has proper costing records, it is permissible to deduct value of material and land (or calculate value of service on cost plus profit basis) and pay service tax on value of service @ 10.30%.
Developers and Builders have following alternative methods available under the service tax law for payment of service tax liability.
If the service is covered under service of construction of commercial buildings or residential complexes, builder can opt for Abatement Scheme applicable to these services, under which service tax is to be paid on 25%/33% of the gross value received, in terms of Notification 1/2006. Alternatively, they can opt to pay service tax under Notification No. 12/2003-ST dated 20-06-2003, as per which, the service provider is exempted from paying service tax on the value of goods sold/transferred. The benefit of this Notification is very much available to Developers/Builders/Works Contractors.
With effect from 1.7.2010, any person providing taxable service of commercial or industrial construction or construction of residential complex (except completion and finishing services like glazing, plastering, painting, tiling, wood and metal joinery and carpentry, swimming pools, acoustic applications etc.) can opt to pay service tax as follows
(a) on 33% of gross amount charged if the gross amount does not include value of land
(b) on 25% of gross amount charged if the gross amount includes value of land (Till 1-7-2010, the 25% scheme was not available. Only 33% scheme was available).
The ‘gross amount’ should include value of goods and materials supplied or provided or used. Thus, if the customer provides some material, its value will have to be added for purpose of payment of service tax.
Conditions for this concession are
(a) No Cenvat of duty/service tax paid on inputs, input services and capital goods and
(b) No benefit of Notification No. 12/2003-ST dated 20-6-2003
If a project is covered under Works Contract service, (where VAT is paid) the Realty players can opt to pay service tax either under Notification No. 12/2003-ST dated 20-06-2003, or under the Composition Scheme, applicable to works contractors.
Though the Department has been taking a view that the benefit of Notification 12/2003-ST dated 20-06-2003 cannot be extended to Developers and Builders, the Bangalore CESTAT, in the case of Sobha Developers Ltd v. CCE & ST (2009-TIOL-1188-CESTAT-BANG) has categorically held that the Developer is entitled to the benefit of Notification No. 12/2003. The service provider can have benefit either under Notification 12/2003-ST or 1/2006-ST and not both.
Important aspects for choice between the Alternatives available to Builder for Payment of Service Tax
Comparative features of different alternatives are as under.
| Issue | Abatement Scheme-Notn. 1/2006 | Notification No. 12/2003 | Works Contract-Composition Scheme |
| Criteria for Applicability/Selection | Construction service | Construction Service or Works Contract Service | Works Contract Service |
| Inclusion of Land Value in the valuation for the purposes of service tax | Yes if Abatement is of 75 % |
No if Abatement is of 67 %NoNoTaxable amount on which ST leviable25%, /33 % of Gross ValueGross Value Less
value of goods & Land used in the Provision of Service40% of Gross ValueEffective rate of service tax2.575%, from date of notification10.30 % on the Net Value attributable to service4.12%Availability of Cenvat credit on service tax paid on input service?NoYesYesAvailability of Cenvat credit on excise/CVD paid on capital goods?NoYesYesCommunication about selection of option to the DepartmentNoNoYesWhether service tax is payable on Free Issue Material ValueNot clearNoYes, in respect of contracts the execution of which has already started on or after 1-7-2009
Options of Abatement/Composition or Notification 12/2003 are available in respect of each of the contracts. It can be said that there are as many works contracts as there are flats, in a housing project.
As for choice between the alternatives, Developers who have contracted out the construction activity can find Notification No. 12/2003 or the Composition Scheme for Works Contractors more beneficial looking at significant benefit arising out of availment of CENVAT credit.
The 25% scheme is simple but the liability of service tax will be high, particularly at places where land costs are very high. Further Cenvat credit of service tax paid to contractor/sub-contractor is not available.
Different options for different contracts can be adopted depending upon the amount of tax liability under each option.
Each contract can be treated as separate contract and valued differently.
Service tax liability on consideration received from Landlord
Where land is received from the land owner by the builder in consideration of some flats/galas to be given later in lieu of the land, service tax is payable on the value of flats offered to the landlord.
As soon as builder gets possession of land from land owner, it is ‘advance received’ and service tax will become payable next month.
In such case, value of service will have to be found out on basis of value of service of identical or similar flat/shop or on basis of cost of construction plus reasonable profit.
Provisions with respect to Cenvat Credit
Cenvat credit on construction activities of one project can be adjusted towards output service tax on sale of another project, provided both the projects are not covered under composition option (25%/ 33%).
As per rule 6 of Cenvat Credit Rules, Cenvat credit is not available if output service is exempt from service tax. Subject to this restriction, Cenvat credit among various projects is indeed inter-changeable, particularly if one opts for centralized registration.
Credit of service tax paid on various input services like telephone, courier, mobile, bank charges, audit, security, catering etc can be utilized against service tax payable on construction services. However if certain projects are covered under composition option, pro rata credit will get disallowed as per provisions of rule 6 of Cenvat Credit Rules
Refund of Service Tax on Booking Cancellation
If Service tax has been charged to customer on the basis of booking and deposited with department & later on booking is canceled by the customer, refund of service tax paid earlier can be made to him.
Amount of service tax so refunded can be adjusted against the subsequent payments of service tax. As per rule 6(3) of Service Tax Rules, if excess tax is paid, in respect of service which is not provided either wholly or partially for any reason, the excess service tax paid can be adjusted against service tax payable for subsequent period, if the value of services and tax thereon is refunded to the person from whom it was received.
Registration
A builder can either take separate service tax registration for each project or have centralized registration after studying pros and cons. If proper records etc. are kept, centralized registration will be preferable. It may be advisable to register each project separately in following cases – (a) If some services are exempt and some taxable or (b) valuation basis for each project is expected to be different,.
Tax payable only by a Builder
If a customer who has purchased a flat/commercial unit/industrial gala/shop from builder/developer, sells it before Completion Certificate, such sale is not laible under service tax.
The words used in the ‘Explanation’ are ‘by the builder or a person authorized by the builder’. A customer is not a person authorized by builder to enter into contract for construction. Hence, a customer cannot fall within that definition.
Even otherwise, service tax is payable on value of taxable service which has already been paid by builder/developer. Even if the customer sales the flat or unit or shop at higher price, it does not mean that cost of construction has increased.
Preferential location and development of complex’ service
As per section 65(105) (zzzzu) of Finance Act, 1994, any service provided or to be provided, to a buyer, by a builder of a residential complex, or a commercial complex, or any other person authorized by such builder, for providing preferential location or development of such complex but does not include services covered under sub-clauses (zzg), (zzq), (zzzh) and in relation to parking place, is a ‘taxable service’. Explanation. — For the purposes of this sub-clause, ‘‘preferential location’’ means any location having extra advantage which attracts extra payment over and above the basic sale price.
CBE&C, has clarified as follows – (Annexure- A to JS (TRU-II) D.O. letter F. No.334/1/2010-TRU dated 26-2-2010)
It has been reported that in addition to these activities, the builders of residential or commercial complexes provide other facilities and charge separately for them and these charges do not form part of the taxable value for charging tax on construction. These facilities include,- (a) prime/preferential location charges for allotting a flat/commercial space according to the choice of the buyer (i.e. Direction- sea facing, park facing, corner flat; Floor- first floor, top floor, Vastu- having the bed room in a particular direction; Number- lucky numbers); (b) internal or external development charges which are collected for developing/maintaining parks, laying of sewerage and water pipelines, providing access roads and common lighting etc; (c) fire-fighting installation charges; and (d) power back up charges etc.
Since these charges are in the nature of service provided by the builder to the buyer of the property over and above the construction service, such charges are being brought under the new service. Charges for providing parking space have been specifically excluded from the scope of this service. Development charges, to the extent they are paid to State Government or local bodies, will be would be excluded from the taxable value levy. Further, any service provided by Resident Welfare Associations or Cooperative Group Housing Societies consisting of residents/owners as their members would not be taxable under this service.
Immediate Steps to be taken by a builder/developer
Apply for registration within 30 days.
Prepare and submit running Bills till cut off date i.e. 1-7-2010, backed by Architect Certificate for the construction completed up to 1.7.2010
Make full disclosure about construction value not offered to service tax so as to avoid penalty for suppression of facts.
(Author Details – M. B. Abhyankar,e-mail:- mbabhyankar@gmail.com, Phone no.-020-24224721. Author is a Chartered Accountant in Practice from Pune, Maharashtra))
Author Bio
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…
can call me 09702981624
can any1 tell will the service tax be applicable if i own a land and i sell it to an builder for construction of building and in return i deal with him for the half of the total flats in that building? what will be the applicability of service tax and mvat on both the parties?
Sir,
I have booked a flat at Ahmedabad “Sale deed without possession ” is done in APR 2010. Total cost of the flat is 20,00000( 3,00,000 down payment & 17,00,000 bank loan). Now builder ask for service tax (2.6% i.e. 52,000 and VAT (0.6% i.e. 12,000)
before sale deed. Kindly guide in my case.
DEAR SIR,
I WAS PURCHASED FLAT IN JULY 2010 AND THE COST OF THE FLAT IS RS.1695000.00 AND THE STAMP DUTY AND RAGISTRATION CHARGES EXTRA BUT NOW I AM PAID TO BUILDER 69600.00 FOR VAT AND SERVICE TAX AFTER DEMANDED BY BUILDER BUT NOW THEY ARE NOT READY TO GIVE ME THE RECEIPT OF SERVICE TAX SO PLEASE GUIDE US,
KHUSHAL
i have booked flat on jan 2010 . and my possesion is in next month (sept 2011). so please tell us is it necessary to pay servive tax and vat to me. also tell me under which rure i need to pay or not pay service tax and vat.
I have purchased falt at Thane – Maharastra my buildre has asked me to pay the service tax,where as I am Ex Armed Forces Personnel(Ex-Navy).Am I be exempted from service Tax?
Dear Sir
I have puchased row house from builder in MP(indore). Total cost of bunglow is 23 lac out of 5 lac is cost of land. Builder has done registry of land dated 26 June 2010. Now builder is demanding for Service tax on construction cost i.e 19 on lac rs.
Please guide wheather service tax is applicable on construction cost to me or not
Dear
I have booked flat in DP cost of flat Rs 48,00,000) in Ghaziabad Inderapuram on 15 March2011 by booking amt.Rs.480000, and remaining amount Rs 3900000 (Loan from bank) was paid on 15Aug2010. Now flat is ready for handover and registry and builder is asking for balances amount and service tax in 3900000. Builder is ready to give payment receipt of service tax but he is not ready to mention or write “receive amount is service tax” (means he is not ready to mentioned service tax in any receipt & any where in written). Apart from services tax, he is asking18% rate of interest in all balance payments (3500000) for 45 days (as per him all the payments should be pay within the 45 days of booking) and he is not ready to give any receipt of 18% rate of interest.
Note:
1. I already paid the entire amount except service tax & 18% rate of interest in after 45 days payment.
2. Builder is given me a letter for taking the No Abjection Certificate from bank and he mentioned balance charges are NIL (means flat cost, maintains etc).
In above situation please can you answer my below question:
1. May, I have to pay Services Tax?
2. Why is not ready to show or write service tax in any documents.
3. 18% rate of interest is as per government rules? If no what will be the charges?
4. Why he is not ready to give any receipt of 18% amounts.
Please answer my query asap.
Thanks
Sir, I want to know whether the flats which are already completely constructed upto 90% and Completion Certificate obtained in 2007 if agreed to be sold vide MOU dtd 7/6/2011 the entire consideration is yet to be recieved whether the transaction will attract any Service Tax?
Please give reply as I have to complete the transaction ASAP.
dear sir
i am a builder and developer , i want monthly vat ration calculation , how to calculation tell me, we follow the monthly received amount segregate the sale deed and construction agreement , sale deed amount is land cost direct less , we calculation the construction agreement is sale cost then less labour expenses , this formula is rong , how to calculation tell me sir.
pls give me reply sir.
Dear Sir,
I have purchased a flat with Rs,6,50,000.00 from our builder.
I have taken a loan from HDFC with amount of Rs.5,85,000.00.
I have paid Rs. 65000.00 advance in the months of Feb 2010 & Rs.400000.00 ( From HDFC) paid before may 2010.
balance rs.1,85,000.00 is paid at the time of documents in the month of Dec 04.2010
& our complition certificate was issue in the month of Oct.2010 ( 30.10.2010)
So i would like to ask that whether i have to pay service tax or not & if yes then on what amount i have to pay?
please send your reply on my mail id chandresh.kotadia@yahoo.com
waiting for your reply
thanks in advance.
I have purchased a flat @ Nashik, the builder is asking me for the service tax on the agreement valeu.My agreement value is Rs.12 lac.I want to know wheather this amount is taxable or not,if yes how much service tax should I pay including VAT.
Pl.reply
Sameer.
we are registered under works contract services for service tax. As we are builders/ developers if we go for composite scheme are we supposed to calculate the 4.12% on the 40% of the gross value or 100% of the gross value of the sale value of the unit.
It would be of great help if you could reply me back on this issue.
THanks and regards
Adi
Accounts Manager
dear sir
i am a builder and developer , i want monthly vat ration calculation , how to calculation tell me, we follow the monthly recived amount segregate the sale deed and construction agreement , sale deed amount is land cost direct less , we calculation the construction agreement is sale cost then less labour expenses , this formula is rong , how to calculation tell me sir.
pls give me reply sir.
Dear, i had purchased a flat @ Dombivli, the builder has asking for me the serice tax amount via on behalf of the builders name, but he is not provide me any service tax certificate. how can i know the builder is not cheating me, is he asking for the amount for him self or for the govt. please help.
Susant
Sir,
I booked a ready possession flat in the month of June 2010 by paying Rs.1 Lac. Cost of the flat was around Rs.29 Lacs. The agreement was made in the month of June 2010. I paid around Rs.12.5 lacs. in the month of June 2010 and gave the balance payment by cheques on the 30th of June 2010. Completion certificate of the flat / bldg. was obtained in the year 2009. I took possession of the flat in the month of August 2010. The builder is now asking for 1% VAT amount on the total cost of the lfat and 2.5% service tax for the amount of Rs.17,40,000/- which was paid vide 2 cheques on the 30th of June 2010. Please let me know asap whether I have to pay the VAT and Service tax amount as requested by the Builder. Thanks & regds. Ms. Achar
Our firm is engaged in providing repair and maintenance of civil construction to Indian Oil Corporation Limited Pl confirm whether service tax aplicable or exempt.If exempt is their a provision for claiming refund for the amount deposited so far.
Regards
Saurabh
Dear
I have booked flat in DP cost of flat Rs 48,00,000) in Ghaziabad Inderapuram on 15 March2011 by booking amt.Rs.480000, and remaining amount Rs 3900000 (Loan from bank) was paid on 15Aug2010. Now flat is ready for handover and registry and builder is asking for balances amount and service tax in 3900000. Builder is ready to give payment receipt of service tax but he is not ready to mention or write “receive amount is service tax” (means he is not ready to mentioned service tax in any receipt & any where in written). Apart from services tax, he is asking18% rate of interest in all balance payments (3500000) for 45 days (as per him all the payments should be pay within the 45 days of booking) and he is not ready to give any receipt of 18% rate of interest.
Note:
1. I already paid the entire amount except service tax & 18% rate of interest in after 45 days payment.
2. Builder is given me a letter for taking the No Abjection Certificate from bank and he mentioned balance charges are NIL (means flat cost, maintains etc).
In above situation please can you answer my below question:
1. May, I have to pay Services Tax?
2. Why is not ready to show or write service tax in any documents.
3. 18% rate of interest is as per government rules? If no what will be the charges?
4. Why he is not ready to give any receipt of 18% amounts.
Please answer my query asap.
Thanks
DR
09.04.2011
Dear sir,
I have booked a flat at Indore on dec.2009. Total Amount payble Rs.35.53 lacs to builder. 6 lacs paid till june 2010. after june we have paid Rs.213000 p.m. to builder with ST Rate 10.33%. my question is that howmuch amount we have to be paid for service tax to builder at the time of full payment for pussation. the builder promise to give pussation on Dec.2011
Thanks a lot.
Shyam Chouhan
schouhan123@rediffmail.com
98265-43369
1) How much % of Service tax in thane District ?
2) I purchase of residential flat in Kalyan Dist Thane & purchase cost of 2150000/- Dt 22.07.2010.
3) Who is payable to service tax? ( Builder OR Purchaser)
4) Please suggest me How much payable of service tax amount & persentage?
5) Service tax calculation disided to as per location ( State, District OR City )
Please sent me service tax matter
Please Reply me my e-mail:- vinod_shinde11@yahoo.com ( 9324131600)
Hello Sir,
I have booked a flat in building which was under construction & made registration & pay stamp duty for the same in Jan 2011.
The first disbursement of 90% payment was made on Feb 2011.
Now at the time of the position on end of April 2011, builder asked service tax (Apprx. 2.6%) along with final disbursement.
The service tax amount is newly added by builder.
Should I agree with & pay the same?
Is service tax applicable after registration & stamp duty done?
Please advice.
Hi,
I have brought a flat along with a garage. Is the service tax (2.575&) be applied on the cost of the (flat + garage) or it is only on the cost of the flat.
Thanks in advance,
Rajib
Hi,
I am going to purchase a ready possesion flat in pune, builder is asking for the payment of service tax & VAT.
Please answer me that either it is liable to the ready possesion flat or not, and what should we paid either service tax or vat? or both?
Please reply me as soon as possible
Please advice if any change for service tax charge for Cab Operator & Tour Operator for transport and Hotel accomodation (Room Only)
Please tell how we can contact Ca Mr.Abhyankar
The builder wants a blank cheque for the service charges to be anounced and I am not getting possession. What should I do. please reply paul2smailbox@rediffmail.com
sir, i have purchased ready possession flat frm builder, in month of nov10, builder has got d completion certeficate in 2009, can u tell me wheather i have to pay service tax for flat?
1.
I have booked flat in flexi plan(cost of flat Rs 20,00,000) in gaur city,noida extn on 25 june 2010 by booking amt.Rs.50000, and remaining booking amount Rs 150000 would be paid at the time of agreement which pamt paid by 1 November 2010).I have paid 10 %,Builder have not charge sevice tax on amt Rs. 50,000,builder have charged 2.575 % service tax (Rs 3862.5 )on amt. Rs 1,50,000.And says that further 80 % payment would be paid with service tax.
2.One thing more asked to u that sevice tax based on super area basis/carpet area basis …?
Can tell me please its right or Wrong ..?
if wrong can you Please send me the details vide my e-mail ashwani_gg11@yahoo.com
Sir,
Further to my previous query-There are 21 in our Apartments, will it apply to all and the Builder.
Vivek N.K.
94481 94536
Sir,
I have purchased a Flat from a builder. I have entered into Agreement of Sale of Residential Flat was executed on 20.08.2006 and Sale Deed for Flat was executed on 31.03.2010. Now, Builder is pressing for Service Tax. Please guide me at the earliest, whether I am liable to pay the Service Tax. Our Builder is registered Dealer in Karnataka Value Added Tax and not registered under Service Tax.
Vivek N.K.
94481 94536
sir,
can a builder registered under works contract for his new project change his registration to abatement scheme ? the work at the site is not started and no service tax has been collected nor paid to the department for this project.
regards
kalpesh.
Dear Sir,
I’ve purchased Home in A’bad. I’ve made full payment by end June’10. at the time of possession, builder insists for service tax which roughly 3% plus.
I request you to advice for:
1. Property value less than 10 lacs. shall i eligible / responsible for service tax? if yes / no, atleast inform with referance serivce tax notification. since builder is not ready to accept this money by cheque & also not ready to provide receipt for the same.
2. In Ahmedabad, which govt office (of Service tax) i should contact to resolve this dispute.
3. Builders are not paying that tax to Govt & they charging/insist to customer. where should i complain for the same?
Kinldy revert / HELP.
Regards,
Paresh Prajapati
9909916971
thank you Mr. Mukund Abhyankar for this nice article.
Hi,
X and Y has purchased two flats together in their name say Flat 1 and Flat 2 and an agreement has been executed in 2009 in the name of X and Y for both the flat and Now In August 2010 a fresh agreement has been executed stating that Y will no longer be the co-purchaser in flat 1 and X will no longer be the co owner in Flat 2 and in that place husband of the respective person will be added to the agreement.Also, amount paid by X and Y respectively (prior to 1/7/2010) will be adjusted accordingly with their respective agreements.
Now, since a fresh agreement has been executed after 1/7/2010 will it attract service tax on the payment made before 1/7/2010.
Sir,
I booked one tenament in Rajkot, Gujarat in April 2010 with 50% of total amount. Completion certificate issued on 28/06/2010. I paid remaining amount on 13/08/2010. Am I liable for ST? How much? Who can get refund? How? If possible send me written document related to completion certificate like my case, as there is no document proof to argue or refund. prakuljd@gmail.com
I HV BOOKED A FLAT (UNDER CONSTRUTION) IN 2008. DUE TO DELAY IN PROJECT (BY BUILDER)IT IS NOT HANDED OVER TO ME UPTIL NOW. WHETHER I HV TO PAY SERVICE TAX ON IT?
11th Aug. `10
I read with interest the article / explanatory notes on “New Service Tax Provisions for Builders & Developers
Jul 3, 2010 Service Tax– by
CA Mukund Abhyankar“
The said article has given good explanation which is of value to investors like us.
The portion Transitory provisions in case of bookings made/ agreements executed prior to 1.7.2010 is a point which I am taking up with one of Chennai based developers.
Looks like the said developer`s Tax consultant has guided him differently and the developer has been collecting Service Tax even before 1st July 2010.
Now I wish to have a copy of the Government published text in regard to non applicability of Service Tax prior to 1st July `10, particularly on what you explained as non applicability of service tax for residentiaal aprtments for money collected prior to 1st July 2010.
Please let me know the Government authority whom I should approach if in case our builder still maintains that service tax was applicable before 1st July `10 and refuses to help us recover such taxes paid before 1st July `10. Please send me the details vide my e-mail kvraama0845@yahoo.co.in
Thanking you in advance.
K.V. Ramani
These days builders include car parking, first year maintenance charge, Lease rent for land, IDC, Power back-up, VAT and Club Membership in the final cost of a project.
I am correct in assuming these charges are excluded for the purpose of Service tax calculation.
Appreciate if you please clarify.
I booked the flat on 29th May 2010 and registration was done on 16th June 2010. The flat is in ready posession and the builder has obtained Completion certificate on 3rd March 2010. Now the builder is asking me to pay service tax on the amount paid after 1st July 2010. What I have to do.
Hi
Can any one will clear my doubt regarding this new service tax?
Is this service tax for customers or builders? My builder is adding these service tax in our due amount.
Currently builders include car park, first year maintenance charge, VAT and Club Membership in the final cost of a project. I am assuming these charges are excluded for the purpose of Service tax calculation. Please clarify.
Respected Sonaliji
You Are not liable to pay servicetax.your payment made before 1st july,2010.
and this rule applicable to those buyer who had given advance money to builder and remaining money given after 1st july.Only remaining payment amount liable to service tax.
The article was very informative.
We had purchased the flat, on 15 May 2010, all the payment was done before 2 june 2010, OC WAS OBTAINED ON 31 MAY 2010, but the possesion letter given by the builder ON 1 JULY 2010,
I am liable to pay servise tax?
we are contractors and registered under VAT Act in Delhiand paying VAT as applicable. Can we pay service tax on of 33% of the payment received as per notifications No 1/2006 issued by the service tax Department.Pls advise urgently.
Read more: https://www.taxguru.in/service-tax/note-on-new-service-tax-provisions-for-builders-developers.html/comment-page-1#comment-70069#ixzz0smc5Pc9X
we are contractors and registered under VAT Act in Delhiand paying VAT as applicable. Can we pay service tax on of 33% of the payment received as per notifications No 1/2006 issued by the service tax Department.Pls advise urgently.
Article is very informative. Answers every question.
The price of residential flat is already high due to Builders high handedness and incresing the price without any basic formula.
Residential Flat for Self occupation should be kept out of purview of the Service Tax so that peoples could afford to own their self occupied residential premises.
All these apartments or flats whatever name you call it only for high earners and normal comman man is left behind and so there are still slums and poor housing facilities everywhere in every city.
Sir i want a just ask whether service tax attract to builder who build & sale a residential building up to third floor in south delhi. Basically it transaction called as Kothi Model.
Pls give reply becuase i am cofuse.