Vat tax 1%- who will bear

Q: Hi
I had purchased a flat in taloja in sep, 2013. Builder has already got occupation certificate from CIDCO in oct,2012. Now he is demanding vat tax 1% from me. Without that he will not give possession to me.. I have already paid other dues. Pls suggest do I need to pay vat tax 1% to builder.

Niraj Chaudhary,

4th August 2014

Property Tax in Navi Mumbai

service tax & vat on under construction property

vat in maharashtra

service tax in maharashtra

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Replies (5)

Hi folks,
Is Vat and Service Tax is applicable on ready-to-move-in property, single residential unit, independent house, villa, bungalow and low cost housing? Should builder issue two separate receipts for both VAT and Service Tax?

anand modak, Pune

17th August 2015

Comment

Really a good question and many of us don' t know about it. VAT and Service Tax are not applicable on ready-to-move-in properties, single residential unit, independent house, villa, bungalow and low cost housing. For instance, if you have bought a property when it is almost ready-for possession, you must consider to postpone your sale agreement to be signed after completion certificate is issued. If you do so, then you will be saved from paying these charges.

Yes, Builder has to issue 2 separate payment receipts i.e. one each for VAT (with Tax Invoice no and TIN) and Service Tax (with Tax Invoice No and ST registration no).

Kishore Pathak, Mumbai

17th August 2015

So, what is really an under construction property? Is land cost exempted from both these charges? Any exemption from payment of service tax on construction

Shaunak Verdla, Mumbai

17th August 2015

Comment

Yes, land cost is exempted from both Service Tax and Vat charges.

A property is termed "under construction" till the builder receives a "completion certificate" from the relevant authorities. If the entire amount for the property purchase is paid after the receipt of a completion certificate, there would be no service tax levied on the purchase of the property.

An exemption from payment of service tax on under construction property is allowed in case of the following cases: 1) Construction of single residential unit, 2) Construction of low cost houses up to carpet area of 60 sq. meter, 3) Single residential unit is defined as a self-contained residential unit designed to be used by one family only.

Kishore Pathak, Mumbai

17th August 2015

Hi Neeraj,
I think you didn't read my reply seriously. It is clear mentioned that if you had paid the VAT and registration fee at the time of registration then you don't need to pay but as you said that you pay only stamp duty and registration fee. Stamp duty and registration fees are two separate charges. So, you have to pay 1% as a VAT. It is better if you take the advice of a legal adviser. They will clarify it.

Kishore Pathak, Mumbai

21st August 2014

Comment

At the time of registration, I have already paid stamp duty and registration fee then why i need to pay vat. Kindly clarify.

Niraj Chaudhary,

5th August 2014

Comment

HI,
Before making any decisions about paying VAT to the builder, flat owners should review details about the owner of the land, the builder's registration date, and the contract between flat owners and builders.

The owners should also seek details of the works that were completed at the time the contract was signed. Flats sold since July 1, 2006 will be liable for payment of the tax, unless the building was issued an Occupancy Certificate before the sale agreement.

Sankalp, Mumbai

28th August 2014

Hi,
Service tax is applicable only when the property is under-construction and not applicable after it is ready while VAT is applicable at time of registration of agreement / sale-deed. If you paid at the time of agreement then you didn't have to pay but if you unable to pay at the time of registration then you have to pay 1% VAT but after getting possession.

Kishore Pathak, Mumbai

4th August 2014

Comment

@Kishore,
Effective 1st June 2015, the service tax is currently 14% of the 25% of the total agreement value for properties below Rs 1 cr or 2000 sq-ft. area in size. For properties exceeding or equal to Rs 1 crore or more than 2000 sq-ft. area, the service tax is 14% of 30% of the total agreement value.

Shaunak Verdla, Mumbai

17th August 2015

Right Shaunak,
Service tax, as decided by the central government, is payable on services provided by the service provider. The service provider collects the tax from the consumer and deposits the same to the government

Kishore Pathak, Mumbai

17th August 2015