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Vat on sale of property

HARSH PRATAP SINGH (CA IPCC) (35 Points)

25 December 2015

Is vat and service tax applicable on sale of property and flats and if yes than at what rate ?

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5 Replies

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 25 December 2015

VAT is applicable on transfer of MOVABLE property. Not applicable for immovables. Therefore completed apartments/ houses, plots not liable for VAT.

Where the property is not complete at the time of agreement, then the FURTHER GOODS INCORPROATED in the aprtment being constructed would be liable for VAT. Example an apartment is being constructed which is 50% complete.

VAT would be payable on the material involved in 50% balance construction pending. As per the SC decision in L&T - 2014 on extent of completion as on date of agreement no VAT can be imposed.

Therefore the deductions available wouldbe a) value of land ( not cost) b) 50% of construction value ( not cost) from the total consideration.

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Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 25 December 2015

Missed the question on rate:

The VAT rate should be the rate of the individual goods transferred. Example if the total balance consturction is 10 Lakhs and Cement/ electricals etc are at 14% ( each State has different rates) Then to the proportion of those ( say 60%) on 60 % of balance construction 14%, Declared goods like steel etc ( see list) 4%- ( say 20%) on the 20% at 4%. Balance at 5%.

Most States provide an alternative of a flat rate depending on nature of activity. In case of construction in Karnataka the rate is 14.5% on goods transferred if identifiable if not on 70% of the construction value. .

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HARSH PRATAP SINGH (CA IPCC) (35 Points)
Replied 25 December 2015

Thanks sir for your prompt reply but if i am going to buy the flat can seller imposed vat on total cost of flat ?

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 26 December 2015

You have not indicated at what stage the flat is???

In normal course VAT cannot be charged on the whole value of flat as there is immovable property involved unless the builder has opted for a otpional lower rate of VAT scheme.