is service tax applicable on purchase of new flat

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 April 2010 sir,
we have booked a flat in nagpur, maharastra in september 2009,and expected possession in end of this month i.e april 2010.
but now builder is demanding 4% extra on the name of service tax but when i search on internet i come to know that service tax is applicable or will come in effect from 1 july 2010
so sir please suggest me that we have to pay service tax or not

thank you

Shyam Lal Naik

Shyam Lal Naik (Expert)
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05 April 2010 What you say is correct. Service tax on purchase and sale of flats(residential building), if any sum is paid prior to issue of completion certificate, is proposed to be made taxable in the Finance Bill, 2010. This provision shall be effective from a date to be notified after the Bill receives the assent of the President.

Probably, the builder is charging 4% extra, treating the service under the category of "Works Contract".