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Karnataka - vat and st(sales tax) flat registration

shankar (Software Engineer) (33 Points)

17 December 2011

1.How can i find if the Real Estate company is registered for taking VAT taxes from Buyers?
2. The receipts which they had issued me earlier didnt had VAT number on that. and on request to they dont Provide me the VAT number, But asks me to pay VAT amount before registring the FLAT.
3.This VAT amount was NOT mentioned in my Sale Agreement ealier.
4. What is this ST(Service Tax ) and on what it should be applied? I didnt had any construction Agreement done, i had only Sale Agrrement, but still am i liable to pay VAT and ST?

Property is in Bangalore

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30 Replies

MJ Krishnamurthy (ACCT(Retd)) (7197 Points)
Replied 18 December 2011

Mr Shankar,

There are a number such dubious real estate builders who have not registered under VAT but collect tax,even registered dealers collect tax but won't pay to the department etc. In your case if any one asks you to pay VAT you can insist on issuing a tax invoice as provided in VAT law(just like any trader).Now same way an invoice is necessary for collecting ST also.If they don't issue a tax invoice you can refuse to pay VAT and similarly ST also. Generally, the total value of an apartment is divided into three parts viz :(1)land cost(2)material cost(3) labour and services.The items No 1 is around 30-35 %,No2 is 40% and No3 is 20-25%. The land cost is exempt from all taxes. Matrial cost is taxable under VAT @ 14%, and the labour and services @ 10% +cess 2 @ ..

If you have not made a contract for constucting flat for earlier and you go to buy it after the entire construction is over these taxes do not apply, because you are buying a in immovable property,like an old built house....

MJK

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gg84 (EFGH) (22 Points)
Replied 19 July 2012

I am also going for a property in bangalore. I want to understand how to calculate the service tax & VAT.

Is the land rate which is exempted on the size of my flat (sq ft) or the actual portion of the land being given in my name of the total area of the property? Also, should this be multiplied by the per square feet price that I am being charged or something else?

Parking comes under land, so shouldn't that be exempted as well?

MJ Krishnamurthy (ACCT(Retd)) (7197 Points)
Replied 19 July 2012

Mr gg84,

On one peice of land several flats are constructed. Some land is also utilised for roads,parks,and other common amenities.But a builder ,normally,divides the land used for a set of flats into parts equal to the number of flats built on it.For example,if 50 flats are built on a land of 10,000 Sq ft area, then each flat owner will be registered with 200 Sq ft of undivided section of that site.It only shows that all the flat owners are the collective or say joint owners of that site.Generally, a builder includes the cost of the site and its development(including conversion ,interest, etc) in the price of an apartment. No one gives the correct figures because it involves some black money. The authorities usually permit to take around 35-40% of the total receipts as land cost for claiming exemption. No taxes are levied on this land cost. Out of the balance amount,under normal circumstances 60% is the material cost and 30% is labour charges and 10% is that of other services. Material cost is liable for VAT labour and services are liable for ST.For collecting VAT and ST it is mandatory to issue tax invoices.A registered builder will quote his 11 digit TIN no in his invoice....MJK

gg84 (EFGH) (22 Points)
Replied 20 July 2012

Thanks for a quick reply Mr. Krishnamurthy.

What I want to know is what should be the price of the land which is given to me - in the example that you gave, I have 200sqft of land in my name - how do I know the per sq ft price, is it the same as the per sq ft price I am giving for the flat?

In my case the builder is computing the ST & VAT on 88% of the total cost (excluding water charges). He has included the club house charges, & just taken on 6 lacs for exemption.

It seems like he is charging a lot based on what you have explained above on the split up of what should be included in ST & what should be included in VAT.

MJ Krishnamurthy (ACCT(Retd)) (7197 Points)
Replied 20 July 2012

Mr gg84,

You can or should ask for details of the charges included in the total amount payable for ascertaining your tax liability. The exemptions claimed by them intheir returns should be the same while collecting taxes from costomers also. The land cost is generally 30-35% of the total amount charged for a flat. On the balance amount some pay composition rate tax @ 4% for VAT as well as ST.Club house charges include cost of many items like,gym eqipment,games(like tennis,shuttle,billiards etc)kitchen,reading room/library,furniture and many more. such charges are to be excluded from VAT Builders also charge for 24X7 water supply,lift,security etc which are all out of VAT liability. A group of buyers should join to make the builder to spell out the details and come down to correct charges........MJK

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Suresh (Service) (91 Points)
Replied 20 September 2012

Sir MJK, its really pleasure to have you on board of this forum and i guess you are the right person to queries related to VAT. In continuation to the above discussion, would like to seek your opinion for below: If a person execute two agreements one for land and another agreement for Build. In this case the agreement to build contains construction of flat only. is VAT &ST both are liable for tax under this circumstances? If yes what are the present rates......

Ankit (Engineer) (30 Points)
Replied 25 September 2012

Hello Sir,

I have bought property in Bangalore in 2010 and i got possession recently. I have been asking my builder to clarify on VAT & ST calculation as there is only one Sale Agreement between us. I have been provided below calculation from builder which i feel its not according to the comments you put above. Can you please let me know if the calculation is correct and if not how we can approach Builder on this calculation.

VAT: 13.5% of 70% of basic cost+carpark

ST : 10.3% of 30% of Basic Cost+carpark

Regards,

Ankit

RG (Mgr) (21 Points)
Replied 22 December 2012

Hello Sir,

Need help and clarifciation hence this messege posted here.

I am considering to buy a rowhouse (superbuilt up area # 3600) and the final cost excluding part B charges is 1.35 CR including land. However, there is no bifurcation of cost towards land and construction charges. Builder is asking to pay 9% VAT and ST on 1.35 cr. The break-up of 9% is

14.50% VAT on 75% construction cost = 10.875%

12.36% ST on 25% construction cost = 3.09

Total (10.875 + 3.09) = 13.965%

Less 30% (cost of land) = 4.1895

Total tax payable = 9.7755% on 1,35 CR is 12 lacs.

Is the above calcualtion correct? Furthermore, builder will not issue the tax invocie as they said that VAT+Tax has already paid to government hence an acknowledgement will be provided towards to VAT+Tax paid.

Note: The property is ready to occupy as almost 80-85% word is done and rest will be completed in 2 months time before the registartion of property.

Please let us know if the above calculation towards the VAT + ST is correct? Look forward hearing from you soon as I am about to pay the booking amount in a day or two. Thanks in advance

MJ Krishnamurthy (ACCT(Retd)) (7197 Points)
Replied 12 February 2013

M/s Rg and Suresh,

Somehow I have missed to answer your queries. It is already old. You might have found solution from other sources. If both of you still need answer to your queries pl confirm, I will give detailed reply......MJK

Siva Subrahmanyam Vishnubhatla (asst.manager accounts) (37 Points)
Replied 27 February 2013

Sir,
I purchased a Flat in Banaglore from owner which he got under land owner-builder development agreement entred in 2005-06. Flat registred in October 2012 for Rs.32.00 lacs ( 1800 sft) and no other payments was made. As per the agreement with owner Vat and service tax payable to the builder at the time of possession and builder yet to give the posssession of the Flat.

Now builder is demanding Vat @ 14.50% (applicable rate from 01.08.2012 in Karnataka) on 70% of constrcrction cost of Rs.2400/-. after (excluding Rs.600/- towards cost of land). total cost arrived by builder is 2400+600=3000. where as my purchase cost is 1800/- per sft. including cost of land. Builder not registered under composition Vat scheme. Can he charge Vat on notional cost of 2400/- per sft/- against my purchase cost of 1200/- excluding land ? Service tax also calculated at 12.36% on 33% of Rs. 2400/- Please guide me. Thanks in advance

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MJ Krishnamurthy (ACCT(Retd)) (7197 Points)
Replied 02 March 2013

Mr Siva SV,

I have answered your PM on the same point.......MJK

Siva Subrahmanyam Vishnubhatla (asst.manager accounts) (37 Points)
Replied 03 March 2013

Dear Sir,

With reference to the my previous query on VAT and ST payment on owners' flats in Bengaluru, our entire group and myself salute for your valuable opinion and service to the community.

Your opinion gives us more confidence to contend our case stongly.

We, flat buyers formed a group and broght to the notice of owner of this excess charge by builder but owner is dragging the issue since last 3 months without trying for any resolution.

Please suggest right channel to bring in authorities if buider demands non-legal tax.

Thanks
Siva

subrahmanyam34 @ yahoo.com

Siva Subrahmanyam Vishnubhatla (asst.manager accounts) (37 Points)
Replied 07 March 2013

Sir, I am working in Mumbai and members of my group (Flat Buyers) at Bengaluru would like to meet you personally to get advice on how to proceed further. My contact No. is 9167196627 and request you to provide your mail ID or contact number to meet personally.
Please help us.

Thanks

Siva Subrahmanyam V

Elaine (B.Com) (22 Points)
Replied 06 December 2013

Hello Sir

A firm for eg, A&Co; is a construction firm and it has hired firm B&Co: as a subcontractor. The subcontract consists of labour and materials. A&Co; collects 4% of vat on the advance from the customers(flat buyers) & pays 4% of vat on the subcontractor charges. If A&Co; is registered under VAT under the KVAT Act, then how should the vat payable by firm A&Co: should be calculated?

Is the following calculation of VAT correct

[Advance(inclusive of vat) - subcontractor charges(inclusive of vat)]* 14.5%?