The following major changes have been made for real estate builders post the Finance Act 2010, which are made applicable from 1.7.2010. It may be noted that the said amendments would be effective only from this date onwards. The following are these amendments:

1. Services provided by a builder to a buyer such as providing preferential location or external or internal development of complexes on extra charges have been newly brought to tax.

2. An Explanation is added to section 65(105)(zzq) and (zzzh) which deems construction of a new building and complex intended for sale, wholly or partly, by a builder to a person before, during or after grant of completion certificate by the competent authority to be services provided by the builder to the buyer/prospective buyer except in situations where entire amount is paid by the buyer only after the receipt of completion Certificate. This amendment takes a position contrary to the one taken by the courts and also in the Circular No.108/02/2009-ST dated January, 29, 2009 issued by the Board.

3. For the purpose of issuing “completion certificate” by “competent authority” it has been clarified by notification no.1/2010 that for the purposes of sub-clauses (zzq) and (zzzh) of clause (105) of section 65 of the Finance Act, the expression ‘authority competent’ includes, besides any Government authority,-

(i) Architect registered with the Council of Architecture constituted under the Architects Act, 1972(20 of 1972); or

(ii) Chartered engineer registered with the Institution of Engineers (India); or

(iii) Licensed surveyor of the respective local body of the city or town or village or development or planning authority;

who is authorised under any law for the time being in force, to issue a completion certificate in respect of residential or commercial or industrial complex, as a precondition for its occupation.

This is a welcome clarification as regards the competent authority.

4. Increased percentage of abatement provided by way of notification no. 29/2010:

During the course of debate on the Bill, the finance ministry had already clarified that the benefit of abatement of 75% in terms of Notification No. 1/2006-ST dated 01.03.2006 would be available to the Builders who are being brought under the levy. The abatement is subject to the following conditions:

a)     No exemption would be applicable for mere completion and finishing services

b)    The increased abatement of 75% would not be applicable in cases where the cost of land has been separately recovered from the buyer by the builder or his representative. This means that the abatement would have to be calculated on the entire value of sale of flat/unit. Effectively the rate of service tax shall be 2.575 (25% * 10.3%). Also by presumption the notification has indirectly considered value of land at 8% (75%-67%). This in my view is not correct.

c)     The abatements is subject to non-admissibility of Cenvat Credit on inputs, capital goods or input services.

5. Exemption provided to construction done under the Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana by notification no. 28/2010 dated 22nd June 2010.

Some Practical Issues

(i)        There would be many ongoing constructions/agreements and buyers would have paid part amounts, the Section does not set out the manner in which these transactions would need to be dealt with. What should be done?

In my view as per the provisions of the service tax law “services provided or to be provided” are taxable from the date of the levy. Hence since the amendment is effective from 1.7.2010, then all the payments before this date should be exempt. Further even work completed (deemed services rendered) before this date but payments received after this date would also be exempt.

(ii)       Services provided by a builder to a buyer such as providing preferential location or external or internal development of complexes on extra charges. How would this impact.

The tax is being fundamentally being proposed to be levied on consideration which is actually going to form part of sale price of immovable property. For eg. As explained by the TRU in its clarification extra premium charged for a sea facing flat or for floor rise would be taxable under service tax. Realistically whatever may be the reason, the consideration is still only for sale of flat & not for any service. As per the definition only amounts received over and above the sale price would be taxed. This means anything forming part of the consideration towards the price of flat would not be taxed, leaving no scope for taxing preferences like “floor rise”. What remains to be taxed is extra work receipts done for some internal changes etc which is not a part of the sale price. In my view even this cannot be taxed under the current scenario.

(iii)     Is the composition option (of abatement of 75%) compulsory?

It may be noted that the composition option of paying tax on 25% value is not compulsory. Hence the builder/developer shall have the option of paying service tax based upon the following methods:

  1. The first option is to reduce the material value and pay tax @ 10.30% on the labour value. This option has an inherent limitation of dividing the profits on sale over the cost of labour and material which is always a matter of subjectivity. Also in case the builder sub – contracts, this method may not fetch proper results. The builder can avail credit of service tax on input services and duty on capital goods in this case.
  2. The service provider under the new provision has the option of claiming an abatement of 75% as per notification 1/2006 read with notification no. 29/2010 and pay tax @ 10.30% on the balance (i.e pay tax on 25% of Rs. 50,00,000). He can avail no credit in such a case.
  3. The third option is pay tax on the entire flat value at 10.30% and claim entire credit in inputs, input services and capital goods. However this option may not be feasible or very practical in the case of a flat sale.

Let’s take an example for the purpose of calculating taxes in a real life case, based upon the above 2 methods:

Single Agreement to sale entered on 28-2-2010
Total consideration of flat Rs. 5000000
Amounts received till notified date  (01.07.10) Rs. 1500000
Amounts received after 01.07.10 for services rendered till notified date (01.07.10) Rs. 500000
Amounts received after 0 1.07.10 for work done after 01.07.10 Rs.3000000

Working:

Option 1 (abatement of 75%) Option 2 (payment @ 10.3% on labour charges)
Amounts received till 1.7.10 Nil Nil
Amounts received after 01.07.10 for services rendered till notified date (01.07.10) Nil Nil
Amounts received after 0 1.07.10 for work doneafter 01.07.10 25% of balance Value of proportionate labour charges over the entire flat value. (This would be linked to the Work In Progress.)

(iv)      Is there any other method by which tax can be paid?

If we make a close reading to the notification no. 29/2010, the abatement of 75% is not applicable “in cases where the cost of land has been separately recovered from the buyer by the builder or his representative”. This means that in cases where there are Principal to Principal Agreements or where the land owner directly receives his share of revenue towards the transfer of the rights in the land (like it happens in the State of Karnataka for instance), then the abatement under this new notification is not applicable. In such a case by presumption the land value is considered what is charged and the builder can avail the benefit of notification no. 1/2006 and claim abatement of 67% on the value excluding the land. He can also alternatively decide to pay on the entire value and claim full Cenvat Credit or even pay merely on labour charges.

Illustration depicting the effective tax burden being less than the above composition rate of 2.575% and further offering benefits to the builder.

(Actual Flat Value: 50,00,000; Land transferred separately : 20,00,000 and Construction agreement value : 30,00,000 out of which 10,00,000 is labour)

Method of tax Computation of tax Effective rate on flat

(50,00,000)

Payment on labour 10,00,000 * 10.30% 2.06% *
Abatement method (67%) 30,00,000*33%*10.30% 2.04%
Full Rate 30,00,00 * 10.30% less CENVAT on inputs, input services and capital goods !!!**

* Under this method CENVAT credit can be availed in relation to input   services and Capital goods thereby reducing the net outflow of the builder to a great extent.

** Under this method the tax outflow can be substantially lower considering the Excise, CVD and service tax impact on all goods and services, thereby giving a chance to leverage the same, without affecting the customers pockets.

The above however is possible clearly in a principal to principal agreement between a land owner and a builder. In other cases, where builder himself transfers by way of a different agreement then the question of valuation of land comes into play. In such cases what should be the value of land would always be a bone of contention. In my view the Fair Market value of the land can be considered as per the laws for the time being in force for stamp duty valuation purposes.

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0 responses to “Service Tax on Builder-Amendments effective from 1st July 2010”

  1. A. Goswami says:

    Sir,
    Please response on my following equerries.
    I purchased a flat on 2nd floor from a newly build three stories residential building from a builder on march 2011. Amount paid / register amount was 14 lakhs. I paid that money during registry on march 2011. There was no mention about service tax on registry. Neither builder / i.e. seller , nor me i.e. purchaser paid service tax on that registry, or before registry days or after registry days. Now builder is claiming Rs. 42000 for service tax from me as he has to deposit it for that registry of flat to Tax department by 31 Dec, 2014.
    i) Is he (seller / builder) is liable to pay service tax of Rs. 42000 (approx.) at present for that sale of flat to me?
    ii) Can he claim from me the amount that he has to pay as service tax?
    Please reply & it will be highly solicited.
    Tnx
    A. Goswami,
    0 93162-11601

  2. bharat says:

    i have registered my flat on 17/12/2009 please let me know whether I have to pay service tax. if yes how much percentage of agreement value

  3. Abhaya K Pal says:

    i applied a house in 2009 in noida(UP) still under constriction may give possession in dec-2013.Under what rule they charge PLC?IDC?EDC/Car Parking/ along with service Tex On Super Area.Is this tex have to pay by Builde or Buyer.May i get correct rule. pl help

  4. Zeeshan Khalife says:

    Hi,

    We have purchased a flat in Seawoods, Navi Mumbai and it’s registration was done on January 2011. Flat costed us around 49 lacs. We have received OC for building from Builder but for getting Possession Letter of our Flat builder is asking us to pay Service Tax and VAT which he says is equal to “5%”.
    So I request you to kindly suggest whether we have to pay any such taxes.
    If yes then can please let me know how much ???
    Please give brief description. Thanks waiting for your reply

    Best Regards,

  5. mogal s.p. says:

    In my apartment there are 11 flats.Can i pay service tax.My flat agreement is 1100000/-.

  6. Niraj Narain says:

    I have booked and done registration on new flat before 1st July’10. It was under construction building. I have done some payment before 1st July’10. Now my builder is asking service tax @ 2.75% on those payment which was done after 1st july’10. Please guide me!

  7. Datta says:

    I booked flat on March 2011 which is undercostruction and my builder take service tax 2.575% on flat value 151900 as 39000/- . He has taken post dated cheque from me.

    My flat is outside corporation in pune.

    Still I need to pay Service Tax?

  8. Kavita says:

    I have booked a flat on 01-08-2010 for 2200000. my property is under cunstruction & builder is asking for service tax. Can anyone plese advise what is tha claculation of service tax. I hace 450000 by cheque & remaining is a llan fron bank. Please reply……..How much service tax i need to pay to the builder.

  9. Hemant Girsawle says:

    I have purchased a flat in Oct’2010 which is costing 1700000 (17 Lakhs).
    The flat is now under possession state and builder is asking for service tax.

    As I understand(as per ammendments) that service tax is excempted for low cost homes (below 20 lakhs). Hwether this is true??

    Whether the service tax is aplicablefor me??

  10. Asif says:

    One hell of a Goverment why are they killing us.

    Unbelievable good job I will vote for you so that you can completely kill us.

  11. p.n.sharma says:

    i bought a flat in pune in march-11. nw builder demanded to pay service tax @2.575% on total saleable value of flat plus on other charges also means on entire value i hv to pay. is it correct let me know ehat is correct as per law on force

  12. Neeraj says:

    Hello,

    I have purchased flat from a reputed builder in Pune in 2008. I took possession of the flat on 31st July 2010.

    Yesterday I got a demand from builder regarding service tax.

    The heads covered are as under –
    1. Development Charges – Balance as on 01/07/10 (Service Tax @ 10.30%) [I am not sure what development charges are as it is not mentioned in my agreement]. Also I am not sure why they are asking this now & not the previous year.
    2. Monthly Maintenance (Aug’10 to Mar’11 @ 1500/-) (Apr’11 to Dec’11 @ 1800/-) (Service Tax @ 10.30%) – Rs. 2905/-
    3. Non Occupancy Charges from 1st Jan. to 31st Dec. 2011 (Service Tax @ 10.30%)

    Please let me know if the heads mentioned above are viable to levy service tax.

    Thanks & Regards,
    Neeraj

  13. Puneet says:

    I have booked a flat on Nov 2010 in Zirakpur, Punjab.Builder is asking me to pay service tax.I heard somewhare that bombay high court put hold on this ST. Please give me the exact information about his. whether i have to pay the S.Tax?

  14. Puneet says:

    HI

    I bought falt on 30th Dec 2010.Builder is asking me to pay service tax.I heard somewhare that bombay high court put hold on this ST.is it right.

    Kindly mail me ASAP

  15. Amit says:

    There is no proper documentation available on this issue.Builders are taking advantage of this situation and forcing custumers to pay 2.575 % service tax as well as 1 % vat on total agrmment cost even agreement made before April 2010.
    This shows that how poor is our government in communication on new rules.

  16. somanath says:

    Dear Sir,

    Purchased flat in Ahmedabad in 1.08.2010 and all payment was done in Sept 2010.Builder has construted the flat in March 2010 itself and my all payment has done after Aug 2010.Pl inform whether I had to pay service tax of 10.3. agreement sale need has done Nov 2010. Pl reply

    Regards

    Somanath

  17. Divya says:

    We have booked a flat on the 13th floor of an under construction complex in Mumbai by paying 15% of the cost. It is a 15 storied building and it has got the plan approved till the 12th floor. We are waiting for the approval from the authorities for the 13-15th floor so that we can register the property in our name. Now the builder has asked us to pay the service tax on the payment made till date before 27th mar 2011. My question is that are we liable to pay the service tax now or wait till the plan gets approved by the authorities?
    hoping to get a response soon.

  18. Amit says:

    We have done agreement on Dec 2009, now in march 2011 at the time of possession builder is demanding 2.575% service tax on total cost of flat (100 % Agreement cost + maintainace deposit + 1 year maintainace ), how we can challenge builder in such case?

  19. MADHAVI says:

    pl advise as to whether flats given in kind by the builder will be hit by service tax?

  20. Jaydeep Mavani says:

    Hi,

    I just want to understand this service tax applicability from the builders point of view. I am an individual with a property in my name in a prime locality in Mumbai. I have tied up with a renowned builder to develop the property jointly (50:50). 95% of the Expenses are incurred by the builder and 50% is reimbursed by me as my share. The total no of sq fts to be developed has been pre decided and we have allocated the sqfts between us. We both can sell our kitty of sq fts at what ever rate we want and the revenues will be totally ours. Now the problem is the service tax. As the whole expenses are paid by the builder the service tax credit is taken by him. As the sale of sq fts in my stock also attract service tax i am liable to pay the same. Just a few questions on the above case
    1 Can i ask the builder to transfer 50% of the ST credit to me and the same i can utilise to pay my ST liability. As this is the only way i can ask him to pay me the 50% of the ST benefit.
    2 As we have the option of either exercise the abatement of 75% and pay ST on the balance (in which i would not be able to take any credit), or take credit of the service tax in one transaction (taking the liability on 100% of the labour value + related profit)

  21. MB says:

    We booked a flat in Pune and paid stamp duty + registration in Apr’10.So far have paid about for booking , plinth and 1st slab.At the time of registration was advised that if the registration was done before Jul’10 then i could save 10 % sales tax but now have been advised that this has to be paid by the buyer which means that the flat will end up more expensive than i had budgeted for.

    Please advise if this is true and what is the exact percentage to be paid.

  22. rohit says:

    I booked a flat at noida on 19.7.2010. Buider asked Plc 100% service tax 10.3% for floor rise,parkview,cornerview. Please letme know whether it is right or wrong,also clarify correct
    reply.

    Rohit

  23. P Rane says:

    I have purchased under construction a flat in Thergaon, pune in 20 July 2010. at the time of buying there was no descussion made on service tax from builder. now he is asking for service tax. kindly guide me what to do? the possession is due by March 2011.
    The property value is of 17.85 Lac including parking+MSEB+Stamp Duty.
    I paid 4,37,000 DOWN PAYMENT and 13,48,000 IS THE LOAN AMOUNT BUT stagewise payment will pay from the loan.
    FIRST PAYMENT IS 6,00,000 which Cheque has Aug 2010 builder gives me receipt for that amount.
    Second PAYMENT IS 3,19,000 which Chegue has Oct 2010 my builder gives me receipt for that amount.
    Last PAYMENT IS 4,29,000 that is remaining.
    MY agreement is done in 20.07.2010.
    My flat is 65 % ready. I have not collect the completion certificate from the builder.
    MY agreement is done in 20.07.2010.
    My service tax is Rs.55000.00
    Also I hear about Service tax ,can this is applicable for my flat
    The low-cost housing segment (property worth less than Rs. 20 lakh) will be exempt from service tax.
    still builder is charging service charge from me.. can anybody throw light on it & guide me…
    I confused in this matter .
    Thank U.

  24. NAVKESH SABHARWAL says:

    Also I hear about Service tax ,can this is applicable for my flat
    The low-cost housing segment (property worth less than Rs. 20 lakh) will be exempt from service tax.
    still builder is charging service charge from me.. can anybody throw light on it & guide me…
    I confused in this matter

  25. swati says:

    I have purchased under construction a flat in Rahatani pune in 16 march2010. at the time of buying there was no descussion made on service tax from builder. now he is asking for service tax. kindly guide me what to do? the possession is due by JAN 2010.
    The property value is of 16.72 Lac including Car parking+MSEB+Stamp Duty.
    I paid 5.72000 DOWN PAYMENT and 11,00,000 IS THE LOAN AMOUNT BUT stagewise payment will pay from the loan.
    FIRST PAYMENT IS 7 ,62,000 which DD has Date is 28-6-2010 that is in june but my builder gives me receipt for that amount on date 8-7-2010.
    Second PAYMENT IS 1 ,50,000 which DD has Date is 9-8-2010 my builder gives me receipt for that amount on date 12-8-2010.
    Last PAYMENT IS 1,85,800 that is remaining.
    MY agreement is done in 3-5-2010.
    My flat is 100% ready. I have not collect the completion certificate from the builder.
    MY agreement is done in 3-5-2010.
    My service tax is Rs.28325(on11,00,000Lac)
    My Builder asks for service tax HE GIVES ME TWO OPTION TO PAY SERVICE TAX
    1. he says that he take service tax from me AND gives a receipt of Rs.28325 but not mention in that receipt that this money is for service tax.(ONLY TAKES MONEY).
    2. he says that he gives on a letter pad , is mention in that he take service tax from me but not mention that HOW MUCH MONEY HE TAKES FROM ME.
    Also I hear about Service tax ,can this is applicable for my flat
    The low-cost housing segment (property worth less than Rs. 20 lakh) will be exempt from service tax.
    still builder is charging service charge from me.. can anybody throw light on it & guide me…
    I confused in this matter .
    Thank U.

  26. Prabhanjan says:

    Dear Sir,
    I have made an agreement to purchase a flat in Mar-10.I will get a possession for the said flat in 2012.
    Now builder has demanded a service tax in a following manner.
    1. For the total 4 slabs.(Made a payment after 01.07.10)total amount*2.575% (Currently work is completed till 4th slab)
    2. Suggest modification having cost of 124150. On that service tax of 10.3%
    3. For the MSEB & society Maintenance having cost 90000.On that service tax of 10.3%

    Please suggest the service tax levied by the builder is correct?
    Waiting for your response as early as possible.

    Thanks,
    Prabhanjan

  27. N Srinivasa Rao says:

    Hi

    I have purchased a flat @ 18.5 lacs and for amenities like water, Maintenance & electricity is 1.25 lacks. i have paid all the flat cost before 1st july 2010 & i have paid amenities amount after 1st july 2010. does i need to pay service tax for 1.25 lacs. if i need to pay how much it would be.

    please clarify.

  28. Murli Krishnamurthy says:

    As a lay man it seems manfestly unjust to charge the customers of self financing schemes service tax, where tbe buyer pays the builder according to the progress of the construction. In future, one would continue paying advance with a contractual understanding with the builder that after the compleltion of the project, the proposed buyer would have the first right of offer at a pre-specified price.

  29. kishore agarwal says:

    in your question box, filled with full of questions and not the reply for their querries. only a few replies (in old site) for the question even i can name it from the web site. when they expect some guidlines, pls help atleast a week/ 10 days if not immediately.

  30. kishore agarwal says:

    in your question box, filled with full of questions and the reply for their querries. only a few replies (in old site) for question even i can name it from the web site. when they expect some guidlines, pls help atleast a week/ 10 days if not immediately.

  31. Niranjan says:

    I purchased a flat and registered in July 2008. I shifted to our House in 2009 March. In this case do i need to pay Service Tax or not required.

  32. hemant says:

    will the service tax paid to the builders @2.575% is eligible for claiming CENVAT though it is not a part of my output service?????

  33. DINESH GUNWAL says:

    i booked a flat on september 2010
    builder is demand new service tax this is right or wrong.

    pls guide me

    thanks with regards

    dinesh

  34. santosh kumar tanti says:

    Hi,
    I booked a flat on september 2009 and paid all the amount on february 2010 through financial institution by taking loan.Whether it is qualify for Service tax as applicable from 01 july 2010.
    Thanking you.

    • Ratan says:

      No you are exempt from any service tax since the law became instrumental from 01.07.2010. Kindly read the Law for yourself and read many reviews on the Law. You will learn a lot. This site is useless I believe coz all I can see is desperate queries but no answers…

      • admin says:

        Ya . You are right. This site useless just because your query not get answered. But my dear dont forget this website is for free. We are not charging anything for providing the updates and neither we are charging anything for answering the queries.

  35. S.Chakrapani says:

    Dear Sir,

    I booked an apartment in OMR , Chennai, for an amount of Rs.60 lacs, out of which 90% of the amount has been paid before November 2009. the balance is only Rs.6 lacs apprx. there is a confusion between the builder and myself regarding payment of service tax.

    The registration has also been completed in April 2010. Now the service tax is applicable only for the remaining 10% or i have to pay the service tax for the entire amount?

    I would really appreciate if you clarify the payment of service tax as the service tax is applicable only for the payments made from July 2010.

    Awaiting your response A.S.A.P.

    Thanking you,

    Best Regards
    S.Chakrapani.

  36. bhalchandra Deshpande says:

    hi
    my question is regardig the service tax and value of sales tax under the maharashtra sales tax act ( vaT)
    if builders original value of flat is 4000000/- he charges 200000/- for parking and 100000/- for Mseb and other incidental charges total cost will be 4300000/-
    how we calulate the service tax is flat is under construction and builder is yet to get the completion certitifiate

  37. vivek moghe says:

    hi,
    i am going to purchse new flat which is in ready possession from the builder , hw has got the completion certificate, am i liable for service tax/
    thanx,

    vivek moghe

  38. Shakti Shroff says:

    Hi,
    Below is my case.

    I have booked flat and did registration on 28th June 2010.
    Agreement cost is Rs. 40 Lakhs. Out of this, I paid 1 lakh before 1st July.
    Remaining 39 Lakhs payment falls in period 1st Jul to 30 Sep.
    At the time time of agreement i.e. 28th June, the construction was 95% complete.

    So can someone please help me to calculate VAT and service tax amount.
    Does the 95% completion will come into scenario.

    Thanks,
    Shakti Shroff
    Cell: 9325358448

  39. Sunil says:

    Dear Sir

    This seems to be harsh for salaried class buying a home. we pay tax on salary and over and above such taxes.
    I have booked a flat with my max limits and with this tax my budget is going tight. my doubts

    (a) is the buyer who pays the tax or the company

    (b) can it be submitted for review with Govt

    (c) is there an exemption on this
    pls advice

  40. Praful Dudharejia says:

    I had booked tenament in February. More than 50% payment given in April. Builder has got completion certificate before 1/7/2010. Am I liable for service tax of remaining amount?

  41. Ujjal Singh Chhattwal says:

    Sir

    We r staying in a flat at Skynet Enclave located in Zirakpur, Punjab and have been residents here since the past over 2 years and we already were given the posession 2 years ago of the residence that we r staying by the Skynet Builder. We have been paying Rs. 600 every month as maintaince charges which include services for sweeper, security, water etc.

    The builder has started charging us 10.3 % above the Rs 600/- that we already are paying as maintainance charges. Is the builder entitled to collect 10.3 % as service tax from the owners who already have had possesion of their respective flats prior to 2010. Please advise us so we can advise our builder if he is charging us for no reason.
    Thank you.

    Ujjal Singh Chhattwal
    Zirakpur

  42. bhaven says:

    i have purchased a property in gujrat,costing 25 lacs..and if the work is under construction,and he is considerd tht amount as advance recieved.i have ,made 45% of the pmt to builder before 1.7.2010.
    and remaining is still to be paid .
    i would recieve a possesion in october.
    would i be liable to pay service tax on the remaining amount?and y ?

  43. Al says:

    I purchased a flat in wonder properties in Pune.
    The agreement of our flat was of 16/04/2005. The possession date was 31/03/2006. The gross valuation of the flat was 13.5lacs. Bal.amt. of 67500 was to be paid on possession. Still the possession of d flat is pendin as NOC was not taken by the builder.
    Consumer court has ordered to give possession to builder by 31/07/2010.
    But now the builder has charged us with the service tax of 34830 on agreement valuation of flat that is 13.5 lacs @ 2.58%.
    Whtr this service tax is applicable to us as the possession of the flat as per the agreement was due on 31/03/2006 ? Any solution please revert soon.
    Thank you !!

  44. Al says:

    I purchased a flat in wonder properties in Pune.
    The agreement of our flat was of 16/04/2005. The possession date was 31/03/2006. The gross valuation of the flat was 13.5lacs. Bal.amt. of 67500 was to be paid on possession. Still the possession of d flat is pendin as NOC was not taken by the builder.
    Consumer court has ordered to give possession to builder by 31/07/2010.
    But now the builder has charged us with the service tax of 34830 on agreement valuation of flat that is 13.5 lacs @ 2.58%.
    Whtr this service tax is applicable to us as the possession of the flat as per the agreement was due on 31/03/2006 ? Any solution please revert soon.
    Thank you !!

  45. haresh says:

    hi i have purchased one tenement.completion certificate came on 25 may 2010.i have paid 1200000 rs out of total 1900000 rs before 1 july 2010.remaining amount 700000 rs paid after 1 july 2010.should i have pay service tax on remaing amount.whom responsibility to pay service tax,builder or buyer..please clarify

  46. mahesh says:

    No one knows that service tax 2.575% need to be paid on which case.

    even the article published on taxguru is generic and adding up confusion. Hope taxguru should take a leading role in clearing this confusion as there is huge amount to be paid to all new buyers who have booked a flat which is under constructionl.

  47. Chirag says:

    i booked a tennament in dec-2009 by 38 lacs and i paid cash 12 lacs in dec-2009and 2nd installmentof Rs. 12 lacs through bank housing loan in Feb-2010 and next bank installment of rs. 12 lacs will be paid by bank in dec-2010. till my booked home is under construction and i have not any completion certificate so how much and how new service charge is effect me.

  48. Ajith says:

    Hi,
    Thanks for the nice article.

    Appreciate your clarification on my below query :

    I purchased a under construction project in late 2009, through bank loan.

    The Title deed registration was done on 25th Feb 2010 after complete payment for the flat construction, cap park & land was made.

    The Building completion / occupancy certificate issued by local govt body is dated 20th March 2010.

    All other payments (electricity , water worker welfare etc payment has been done before 1st July 2010.

    The project is completed before 1st July 2010.

    In this regard, does the builder (or me) have to pay the service tax since all transactions + certificates are issued before 1st July 2010.

    Please clarify. Thanks

  49. Ajay says:

    We have booked flat in Dec 2009.
    Total cost of flat is 30 Lakh.Before 1.07.10 we have paid 20 Lakh against completed construction. Balance payment will be done after completion of work. As per my understanding we will pay tax 2.575 % on blance payment 10 Lakh only. Is that correct? Is there is additional 10.3% tax also applicable?

  50. Ravi says:

    For a builder having less than 12 units, does he need to pay service tax?

  51. Sanjeev Kumar Mahajan says:

    The rates applied are correct.
    Builders customer has to pay service tax alongwith the part payments made by them.There is no stay as of now.
    Builder has to remit the service tax to govt as soon as it is recd
    . U can ask builder copy of registration certificate and copy of challan paid by him
    Regards
    Sanjeev Kumar Mahajan

  52. Debal Mitra says:

    Hi,
    Pertaining to the subject I request clarification on the following….
    As per my understanding the service tax has been levied on the Builder. Whether it is appropriate on the part of the builder to transfer this tax on the buyer.
    If yes the builder is levying 2.575% service tax on the sale value of the flat & an additional 10.3% on preferential location charges & others. Request your clarification on wether if the %tage of Tax imposed is correct.
    When this service tax has to be paid, after completion of the project & before issuance of the completion certificate by the requisite authorities or as per schedule disbursement of payment to the distributor.
    Checks & balances I can advocate on the builder to ensure proper utilization of the tax paid to the builder.
    If any injunction/stay order/other such has been enforced by any Indian court of law on this Service Tax levy.
    Hoping for your reply to the above.
    Best

  53. Shailesh says:

    The service tax will only have to be paid on the remaining amount paid on and after 1st July’10 and not on the entire value of the flat.
    The service tax of 10.3% will be applied on 25% of the remaining amount.

  54. PropertyBuyer says:

    Hi

    We booked flat in december 2010 and is due to possession for feb 2011

    we have paid 70% of the price but builder is saying taht now whatever remaning amount is left if u pay after 1st july you will have to pay Service tax

    i want to know on what basis is service tax calculated. is it on the whole flat amount

    if possible can u please explain with the example

    thanks for such nice article

  55. Viswanathan.c.p says:

    Please provide or attach the notification dated 22.6.10 for exemption based on 28/2010. Is it apply to pvt. sector for apartment costing less than 20 lacs.

    Also the 67% abatement currently provided on the construction cost may be continued for payment of service tax where the land cost is worked out separately based on UDS registration.

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