Service Tax & VAT in Bangalore on under construction property in 2013

Q: I recently booked an under-construction apartment (95% work done) of super built up area 970 Sqft. in Bangalore. The builder sales guy calculated Service Tax (12.36%) on 25% of construction value ( Flat Cost + Car Parking - Land Cost). But after booking during agreement he is saying that norms has changed now and service tax will be charged at 40% of the construction value. He is saying that norms changed since 1-Jul-12 however they did not get confirmation and now only got the confirmation. Please suggest what is current service tax rule is. He is making 2 agreements (1 for land and another for construction). And he did not reveal the modified service tax till I paid booking amount. Also he is asking for 4% VAT on Construction Value. Is it correct and is saying that later on he may charge service tax on maintenance cost as well. Please advise.

Vinay, Apartment Resident

28th March 2013

Property Tax in Bangalore

service tax & vat on under construction property

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Replies (7)

Is the VAT and Service Tax applicable for new flats?

Nakul Sachdev, Bangalore

19th January 2015

Comment

For any under-construction property that is purchased within India is responsible to pay VAT and Service Tax.

Bharat Vasandana, Bangalore

19th January 2015

I heard that the Government has increased the service tax. What is the increased service tax?

Nakul Sachdev, Bangalore

18th June 2015

It is proposed, w.e.f. 31st March 2015, the Service Tax component will increase to 14% (from 12.36%)

Bharat Vasandana, Bangalore

18th June 2015

How to calculate service tax and vat for apartments in bangalore?

Lekshmi,

30th May 2014

Comment

For eg. If the base value of the flat you are looking to buy is 80L , in that case service tax will be charged on Rs 20L ( which is 25% of rs. 80 L). so 12.36 % if Rs 20 L will be Rs. 247300/-

Rakesh, Bangalore

16th October 2014

When you buy a house, you pay for two components:

1) Value of land
2) Construction offered by the developer (service provider)

Service tax is payable only in case of construction services and not on the value of land. In cases where it becomes difficult to ascertain cost of immovable property and service cost separately, government has come up with the provision of abatement scheme where an amount is levied on the total amount.

Sreya Khan, Bangalore

19th January 2015

Hi Lekshmi, Service Tax is Calculated 12.3% of the 40% Portion of the Total Cost ex: Basic Cost = 30,00,000/- and other Charges is Say = 5,00,000/- so now 40% of 35,00,000/- is 14,00,000/- know apply 12.3% Service Tax on this Amount and for Vat it is 5% on Total Value , i,e = 35,00,000/- .

The Best way to Calculate Service Tax & Vat is 9.5% of Total Cost rather then confusing yourself

Vivek Kulkarni,

28th May 2015

I agree with Gajendra but the thing is that if you are buy apartment which is ready to move in will cost you more than buying an under-construction flat. I feel it’s better to pay ST and VAT rather than paying in the pocket of builder or construction company.

Anusha, Bangalore

22nd August 2013

Comment

Yes Service Tax and VAT is only for under construction property. But if you buy flat/ unit only after the builder obtains Certificate of Completion from the Competent Authority you need not have to pay any of them. In short purchase flat which is ready for possession.

Gajendra V, Bangalore

22nd August 2013

Comment

Do we have to pay service tax and VAT only for under construction apartments?

Manjunath, Bangalore

22nd August 2013

Comment

Hey Vinay, you should ask the builder to provide you a break up of all the charges on a written document. For the payment of the service tax it is always advised to make a payment by check rather than cash, as it is accounted as white money and the white payments will be helpful for you from taxation point of view in future and when you will be planning to sell your property. Don't forget to ask your builder to provide you a receipt when you make him a payment by cheque

Balaji, Bangalore

29th March 2013

Comment

When you buy a flat you buy two things from the builder 1. Undivided Land of Share and 2. The flat. Both VAT and Service Tax (As on Jan 2013 ...Service Tax @ 12.36% on 25% of BASIC Price ( if Land Cost is included ) otherwise 12.36% on 33% of Basic Sale price ) need to be paid on no 2 and not on no 1. Make sure you get a TAX invoice for those if builder is not giving you the TAX invoice then dont give those amount.....rest of the things as KTPCL+BWSSB + AMMENITIES are chnarged at 12.36% ....BUT Parking could not be chnarged for service tax as , as per SC decision Parking slot is not an extra service but the part of construction itself

Indrajit Kaul, Bangalore

29th March 2013

Comment