Service tax on apartment purchase

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Querist : Anonymous

Querist : Anonymous (Querist)

03 September 2012 I have booked an apartment for 30 lakh INR,Building is under construction and will ready in another 6 months. I have agreed to pay 5.5% VAT for builder. Initially builder told no service tax need to be paid by me, but now he is demanding service tax @12%. Legally who should pay VAT and ST builder or Customer? what is the rate of VAT n ST in Bangalore? On what value I should pay the VAT and ST? my property registration value is 23 lakh. Thanks.

CA Suresh Jain

CA Suresh Jain (Expert)
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03 September 2012 1. The answer to the question of you should pay service tax or not lies in the terms and conditions of your agreement with buildr
2. Value for service tax is to be decided primarily in terms of notification 24/2012-st, 25/2012-st and 26/2012-st
3. rate of tax is same through out India i.e. 12.36%
4. registration value has nothing to do with service tax

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MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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03 September 2012 Mr Author,
Regarding apartments payment VAT and ST have a common pattern. Out of the total amount payable to the builder 40% is land cost. On this there is no VAT ot ST. From the balance amount you have to reduce charges made for registration,electricity,water,sewage and cable connections,amenities like club,swimming pool,sports,gym,security,lift,etc.After making all these deductions the net figure you get will be the construction cost.This includes material value,which is liable for VAT and labour and services part,which is liable for ST.If proper account is not maintained and declared by the dealer,they are permitted to pay VAT @14.5% on 30% and 12.36% ST on 20% of the total receipts.If the dealer has opted for composition of tax 4% VAT and 5.5% ST on 50% of the total receipts will be liability......MJK

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Querist : Anonymous

Querist : Anonymous (Querist)

03 September 2012 Dear MJK,
thanks for your input, I have few more doubts
1. "40% of total cost is land cost" is it the minimum criteria or is 40% as per rule as land rate varies drastically.
2. Is value of VAT n ST quote by u for 3 cases are same is in all states,
3. I understand total receipt means value as per sale deed in my case it will be 23 lakhs?
as quoted by u
Case 1: land value 40% of 23=9.2 lakh, remaining 13.8 lakh, assuming 50% material value total tax=(5.5%*13.8/2+12.38%* 13.8/2)=1.23 lakh
Case 2: (14.5%*30%*23+12.36%*20%*23)=1.56 lakh
Case 3: I didnt understand how to compute

compared to case 1&2, 1st one value is lower so can I demand builder I will pay as per case 1 method. Is my calculation method right?

Can u please guide me how to know which case is applicable for me as builder would try to exploit. Can I demand for VAT n ST receipt of my apartment only.
Thanks.