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Service tax on flat purchase

Arvind Bind (6 Points)

04 July 2016

how the service tax on purchase on under construction flat is calculated?

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CA ABHAY GUPTA (Practice) (3230 Points)
Replied 04 July 2016

service tax is calculated on the amount demanded by builder or amount received from customer which ever is earlier...

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Arvind Bind (6 Points)
Replied 04 July 2016

how % of service tax is arrived? what is present service tax rate in mumbai for purchase of under construction flat.

CA ABHAY GUPTA (Practice) (3230 Points)
Replied 04 July 2016

At present service tax is 4.2% plus Swach bharat Cess @ .15% and krishi kalyan cess @ .15% total comes to 4.5% on amount demanded or received

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manoj (student) (5205 Points)
Replied 04 July 2016

Refer CASE suresh kumar bansal V/s UOI

It is exempt now

CA ABHAY GUPTA (Practice) (3230 Points)
Replied 04 July 2016

its a delhi high court judgement not binding on every state further It is too early to say who all will be benefitted by this judgement. However, it is yet to ascertain if the Government will challenge the judgement in SC or bring any amendments in the existing Law to escape the returns

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Arvind Bind (6 Points)
Replied 04 July 2016

is there any notification from central govt. on exemption of service tax on budget home?

manoj (student) (5205 Points)
Replied 05 July 2016

but it is high court decision also service tax is under central government sp you can take the benefit

Ajeet Singh (Service ) (190 Points)
Replied 05 July 2016

There are 2 different methods of calculating VAT and Service Tax for under construction flat

Method 1

If total project cost is apportioned flat wise then there are 3 cost components of any under construction flat. These 3 cost heads are Land Cost (approx 35%), Material Cost (approx 40%) and Labour + Service Cost (approx 25%).

Material Cost + Labour + Service Cost is collectively referred as Construction Value.

Method 2:

In 2nd method, instead of calculating head wise cost for under construction flat, VAT and Service Tax is calculated on Total contract value of the flat. This value is amount mentioned in agreement value or registration value / value for stamp duty purpose, Whichever is higher.

Important Points:

1. Land cost is exempted from both VAT and Service Tax.

2. Total contract value include value of land under composition scheme.

3. VAT and Service Tax is not applicable on Ready to Occupy flats. You may postpone sale agreement to be signed after completion certificate is issued.

4. Builder will issue 2 separate payment receipts i.e. one each for VAT (with Tax Invoice no and TIN) and ST (with Tax Invoice No and ST registration no).

5. Service Tax is not applicable on single residential unit i.e. independent house, villa or bungalow.

6. Service Tax is not applicable for low cost housing with carpet area of upto 60 sq. mt. per house in the housing complex but subject to approval from concerned authorities.

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