Tax on Down payment?

Q: Recently I booked a flat which costs Rs Y and paid two installments total Rs X say. The builder sent me a receipt with a service tax added on Down payment @ Rs X*3.09%. This is exclusive of the overall tax charged for Rs Y*3.09. My question is if I am paying tax for overall cost at Rs Y*3.09%, is it even legal to charge tax on down-payment amount? Does this mean I have to pay tax for the entire amount i pay @3.09% above the tax of Rs Y*3.09%? Please advice.

Anthony G,

8th June 2015

Property Tax in New Town Action Area-III, Kolkata

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Thanks for the inputs all!!

Anthony G,

15th June 2015

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Hi Down payment is the difference between the purchase price of a property and the mortgage loan amount. It underlines the buyers commitment to complete the deal and indicates the buyers fidelity in making the loan payments.Hence, the tax is levied in downpayment while buying a property.

Dhiraj,

8th July 2015

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

Joseph Sebastian, Kolkata

11th June 2015

Comment

Hi everyone, can you tell me how I can get Exemption from payment of service tax on Under construction project?

Anil Choudhary, Kolkata

10th June 2015

Comment

Hi, Services tax is payable at the overall cost of the properties either in the one-time payment or in installments.It is the responsibility of the developer to collect service tax from the customer and deposit it to the government. However, due to imposition of service tax, the burden of increased property price has to be borne by the buyer.

Poonam, Kolkata

9th June 2015

Comment

Hi, 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.

Kaustav Paul, Kolkata

9th June 2015

Comment

Hi Anthony, Service tax is levied on the services provided by developers in case of projects offered for sales and when the payment is made before the issuance of completion certificate. The developers had protested against the issuance of any such service tax; however, court verdict went in favour of the government and now service tax is liable on the purchase of property under construction.

Priya Gupta, Kolkata

9th June 2015

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