VAT and Service tax calculation

Q: 80% of construction completed.
The builder is charging the VAT (5.5%) and Service tax (3.09%) on the total cost of the project ( Basic cost+ Car parking+ Amenities) - is this correct?

Ganapathy Ram Venkatraman , Apartment Resident

6th December 2015

Legal in Hebbal, Bangalore

vat and service tax

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Replies (2)

As per the rules, from June 1st, 2015, Service Tax for an under-construction flat will be calculated at the rate of 14 % of the gross value of the property. But as there is a Government abatement of 75 percent (increased from 67 percent), tax will be levied only on 25 percent of the gross value of the property. The effective rate of service tax is therefore 3.5%.

For example,

The basic square feet price of your 1200 Sq Ft flat is Rs 4000 with PLC of Rs 100.
Car Parking Charges = 3,00,000
Service Tax = [{(1200 X 4000) + 3,00,000} X .035] + [(1200 X 100) X 0.14] = Rs. 1,95,300

VAT differs from state to state. In your state if the VAT is 5%, you can extend that your flats construction material cost. All you need to do is ask your builder for the construction material cost of your unit and apply 5% on it and you will get a figure.

For Example

Construction Material Cost of your unit is Rs. 30,00,000
VAT = 30,00,000 X .05 = Rs. 1,50,000

Rakesh, Bangalore

7th December 2015

Comment

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

7th December 2015

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