Service tax on flat purchased

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 October 2012 Dear Sir,
I have booked a flat in Dec.11, possesion will be received in Feb.13, my builder has asked me to pay service tax.
Pls. let me know the amount of service tax & also the provision of service tax.
Regards,

Sanjiv Dandona

Sanjiv Dandona (Expert)
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26 October 2012

Since the flat was booked in Dec 2011 and Posseion will be recieved in Feb 2013, it is quite evident that the flat has been purchased while it is under construction.
With effect from 1/7/2012, Construction Services have been listed as Declared Service under Section 66E(b). Service Tax is levied on Declared Services unless otherwise exempt.
As regards sale of immovable properties the position is very clear. If the flat is sold while it is under construction, Service tax is applicable. However if full consideration is recieved only after construction is completed, there will be no service tax. Th the date of completion of a flat is the date of issue of Completion Certificate by a Competent Authority.

In case of flats benef it of Abatement is available. Under Abatement ( Notification No 26/2012 -ST) 75% of the consideation is allowed to be abated. Thus Service Tax is payable on 25% of the consideration of the Flat. The present rate of Service Tax being 12.36%(including Service Tax) the effective rate of Service Tax would be 3.09% on the total consideration.

Service Tax is payable on advance, actual payment or date on which respetive installment becomes due under the contract whichever is earlier.