interest if delayed payment

Q: i have booked flat in March 16 with 20 % booking amount, now builder has received OC, he is asking for rest payment in 15 days, otherwise he will charge interest,, is this right?? secondly do i need to pay service tax and VAT,, as builder received OC and sales agreement not yet to signed but it is their mentioned in allotment letter.

Arya Koti,

7th March 2017

Property Tax in Atlanta Enclave, Shilphata, Thane

service tax

vat

vat & service tax for under construction property

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Replies (2)

And remember, Since VAT is a state subject, various states have their own laws for levying VAT. To overcome the difficulty in ascertaining the exact cost of materials in the agreement amount, states like Maharashtra provide for the payment of VAT on the entire value of the agreement, under a ‘composition scheme’. In Maharashtra, the rate of VAT under this composition scheme, is 1% of the total agreement value.

Deepankar Godbole, Mumbai

27th March 2017

Comment

Although it is the responsibility of the builder to deposit the VAT and service tax with the government, builders often recover the cost from buyers. It ultimately depends on what the agreement between builder and the buyer provides. If you wish to avoid paying VAT and service tax, please ensure that the same is mentioned in your agreement with the builder.

Sanin Salewala, Mumbai

27th March 2017

Hello Arya!!
Service tax and VAT are applicable, only on properties that are booked at under-construction stages. So, both these taxes cannot be levied on properties that are purchased, after the builder has obtained its completion certificate or Occupancy Certificate. Similarly, there is no service tax or VAT for completed properties that are purchased under resale.

Deepankar Godbole, Mumbai

27th March 2017

Comment

Yes, and as the entire value mentioned in the agreement cannot be treated as a work contract or services provided by the builder, therefore, VAT and service tax cannot be levied on the entire value of the agreement. The law allows you to opt for 30% of the value of the agreement as the service component, and pay the service tax on that portion. Hence, the levy of service tax effectively comes to 4.50% (i.e., 30% of 15%) of the agreement value.

Sanin Salewala, Mumbai

27th March 2017