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Treatment of service tax while purchasing flat

Rahim (Businessperson) (460 Points)

12 March 2013

Need clarification regarding treatment of Service Tax while purchasing a flat.

The Developer charged 3.09% ST before the date of Registration. The consideration was fixed at Rs 15 Lacs.The purchaser has paid Rs 15 Lacs as advance on 12-06-12 by cheque and paid ST @ 3.09% on Rs 15 Lacs, Rs 49350. The registry was done on 01-02-13 and in the deed the consideration of only Rs 15 Lacs was mentioned. What about Service Tax?

What will be the enties in the books of the Developer and the Purchaser? Would the service Tax be added to the cost of purchase of the flat by the purchaser?

Please clarify.

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3 Replies

Neha sharma (-) (1257 Points)
Replied 12 March 2013

I also have the same query regarding treatment of service tax paid on property..

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TKKKKKK (PRACTICING CA) (3268 Points)
Replied 13 March 2013

service tax is tax and added to tax for purchaser. In deed consideration is mentioned only 15 lacs as service tax is not income for seller. but he has to deposite it in gov a/c.

in entries,

purchaser can show fixed asset at consideration what he paid.15 lacs and show service tax as expense.

for seller,

cash/bank dr 15,49,350

to fiat 15,00,000

to service tax payable 49350

krishna bhatt (employee) (236 Points)
Replied 13 March 2013

A	this is the normal practice of charging service tax on final value of property/flat.
A	better it should be clearify at time of making agreement with developer.

B	normally the quotes per squre feet is excluding the ST.
	also buyer is bound to pay registration charges on value of property
	so if we add ST in that value ,it will increase our cost of registration.( so keep it RS.15 Lac )

C	on one hand, developer is collecting 3.09% and paying it to government.so this is not his gain , he have to pay ST on the basis of sale agreement.
C	on other hand, as a user of property we are not eligilble to take CENVAT Crefit of ST paid.

D	As per definition Of ‘Input Service’ under Rule 2(l) of Cenvat Credit Rules, 2004, credit of service tax paid in respect of following services (termed as ‘specified service’) can be availed and utilized only for paying service tax on such ‘specified services’:
	(i) Service portion in execution of works contract and Construction Services (includes Commercial or industrial construction service, maintenance or repair service)
	(ii) Construction of Complex Service including deemed construction service (as listed under Section 66E- Declared Service)
	In simple terms, the nature of input service and output service should be similar

E	CONCLUSION :
E	So if you are providing the output services which fall under above two category than you are very well eligible to take CENVAT Credit otherwise NOT.


F	Accounting treatment :
	1. (if u are not going to take credit )i.e.User / Buyer
	than expense it or you can add it in cost of property

	2.(if you fall under any of the above 2 category)
	than avail CENVAT Credit of ST paid on the basis of Invoice issued by Developer ( Invoice must show ST amount sepatetely )