How service tax is calculated on an individual house construction in a gated community

Q: I am buying an individual house in agated community for 40 laks in andhra pradesh. Out of the 200 sq yards land, house will be built in 1250 sft by the builder. While at the time of buying he said market rate of 12000 per sq yard land and 1300 per sft for construction. But the government price for the land is 5000 per sq yard so land was registered for 10 lakhs before starting the construction. There is no registration for the remaining 30 lakhs. Now builder is demanding 3.5 % service tax and 1.25 % vat tax on the 40 lakhs. My questions here are, as there was no registration for the 30 lakhs, will the builder really pay these taxes to the government, if yes how i will know that ?, He gives only company bills for the taxes not the government bills. Is it correct to calculate service and vat taxes on 40 lakhs. Should he calculate these taxes only on 16.25 laks (only for construction). Please anyone can help me in this regard.

naga, Hyderabad

24th October 2015

Buying property

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Replies (7)

HI
Sir we wanted to sale of single residential unit to buy . Shall i pay vat to govt on individual house, if we shall have to vat on individual house what is the percentage on that

murali, Visakhapatnam

14th April 2016

Comment

Hi,
Service tax is required to be paid if you are purchasing a house which is still under construction. You cannot pay the service tax directly to the government. You would have to pay it to the builder and obtain a receipt for service tax from the builder.

Thanks

Dhananjay, Hyderabad

28th October 2015

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Sir, I have purchased property under construction whose work is completed almost 90%. We have made agreement with the builder at 90% completed level. Pls guide me about how much will be my liability of Service Tax?

Suraj.V, Hyderabad

27th October 2015

Comment

As per my knowledge, Service Tax is not applicable on single residential unit i.e. independent house, villa or bungalow. 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).

Verma, Hyderabad

27th October 2015

Comment

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.
When you buy a house, you pay for two components:
1. Value of land
2. Construction offered by the developer (service provider)

Bharath Konda, Hyderabad

26th October 2015

Comment

Hello Bharath,
I have purchase under construction flat at Hi-tech city for rs. 21 lakh. I have paid Rs. 5 lakhs up to plinth level. Builder ask me for service tax for Rs. 5 lakh. It is compulsory or do i need to pay ST at present? If so, How much service tax I need to pay on whole property and when?

bashir,

28th October 2015

Hello Dear, As per the current rate you have to pay Service tax @ 14% on under construct property. The service tax needs to be paid. Most builders ask for this during the construction period as they might need to deposit it with the government. However, ensure that you confirm with builder that in case of cancellation or some other problem with completion of apartment, would the builder be able to obtain refund of this service tax amount and provide the same to you.

Bharath Konda, Hyderabad

29th October 2015

Effective 1st June 2015, the government levied a uniform service tax of 14 per cent on all services availed in India. Thus, for all under construction properties below Rs 1 crore or below 2000 sq. ft. area, the service tax applicable is 14 per cent of 25 per cent of the total agreement value. But for under construction properties that exceed or equal to Rs 1 crore or are over 2000 sq. ft. area, the service tax applicable is 14 per cent of the 30 per cent of the total agreement value

Dhananjay, Hyderabad

26th October 2015

Comment

Thanks for valuable update, I would like to know is there is any Exemption for payment of service tax on on under construction property?

V. Victor,

26th October 2015

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

Single residential unit is defined as a self-contained residential unit designed to be used by one family only.

Dhananjay, Hyderabad

26th October 2015

Hi,
Service tax on under construction properties is the tax levied for the services provided by the builder or developer during construction of the property. This payment is made before the owner is given possession of the property or receives a completion certificate.

Sridhar, Hyderabad

26th October 2015

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