Six things you must Know about Service Tax on flat purchase or sale

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Six things you must Know about Service Tax on flat purchase or sale

The Finance Bill 2010 has received presidential assent on 8th May 2010 and therefore a new chapter in taxing flat sale has started .In the definition of the taxable services of  ‘Construction of Complex service’ [section 65 (105) (zzzh)], and ‘Commercial or industrial construction service’ [section 65 (105) (zzq)] given in the Finance Act 1994 now  stipulates that construction of house (in any form – apartment / flat / row house / etc) by a builder in a complex is a “service”, and introduced the service tax of 10.3% on such a services .

There would be no levy of the service tax, if the entire amount for the property purchase is paid after the receipt of a completion certificate

The low-cost housing segment (property worth less than Rs. 20 lakh) will be totally exempt from service tax.

This tax would not be applicable to resale properties, as resale properties would essentially have obtained a completion certificate

Since, 75% of the amount charged by the builder is considered to be cost of land, materials,  you would pay 10.3% service tax only on 25% of the amount that you have paid.

Service tax will be applicable for only under-construction properties and not for completed units.

Special services provided by a builder etc. to the prospective buyers such as providing preferential location or external or internal development of complexes on extra charges [Section 65 (105) (zzzzu)] have also been brought as new service under service tax net.Service tax of 10.3% has also been levied on any payment made by you to the builder for getting a preferential location for your house / flat.

  • Any amount paid for getting an apartment on a higher floor
  • Any amount paid to get a flat / house with a specific number
  • Any amount paid to get a flat / house facing a specific amenity, say a swimming pool, lake, park, sea, etc
  • Any amount paid to get an apartment / house facing a specific direction (maybe as per vaastu)

No service tax on amount paid for parking garage.

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  • Dipesh Choube

    I have booked the flat on 27th Jan,2010 and had agreement on 17th march,2010. Does the new rule of Service Tax on flat amount will be applicable to me. I have paid 15% of the flat amount and my bank EMI are still to begin.

  • Munish Gupta

    I have the exact same questions as Mr Dipesh. The Flast Buyer agreement was executed in May 2010. Would I need to pay service tax on payment made after July 1, 2010.

    Thanks,
    -Munish

  • http://maacvashi.com sanjay khanted

    I have the exact same questions as Mr Dipesh. The Flast Buyer agreement was executed in May 2010. Would I need to pay service tax on payment made after July 1, 2010.

    Thanks,
    Regards
    Sanjay

  • Deepak

    Hi,

    I have bought a flat@16,00,000 and made full payment (400,000 my contribution+12,00,000 home loan) in October 2011 as building was completed constructed. I am yet to receive the possession (it is march now). Will I be liable to pay the service tax as I have made the full payment after completion of all the slabs.

    Regards,

    Deepak Sharma

  • ANAND

    I BOOKED FLAT ON 6 NOV 2009 AND I MADE AGGREMENT ON 12 NOV 2009. NOW BUILDER DEMAND FOR 10.3% SERVICE TAX ON DEVELOPMENT CHARGE, SOCIETY FORMATION, MAINTAINANCE, ELECTRICAL AND WATER CONNECTION. PLEASE ADVICE ME, I NEED TO PAY THIS SERVICE TAX OR NOT. ALSO BUILDER SAY ME FROM 1 JUL 2010 SERVICE STARTED.

    • d.subramanyam raju

      I have purchased a house and got it registered in march 2010.can Ihave to pay service tax?

  • nitin Patil

    have booked the flat on 14th Jun,2010 and had agreement on 04th Aug,2010. Does the new rule of Service Tax on flat amount will be applicable to me. now builder is asking for 2.59 % service.
    pls. guide

  • http://yahoo.com Ashok Singh

    I have booked the flat on 8th March,2011 and had agreement on 25th march,2010. As per builder position in march 2011 and now he is asking for service tax . should I need to pay Service Tax on flat

  • Neeta Singh

    i have gone for agreement of flat on 25 dec 2010,I have paid 90% of the flat amount as mentioned in agreement & rest 2% as asked by the builder require to pay when going for sale deed registration.My agreement is registered however.The Builder at present is asking me to pay the Servicetax on the payments i made earlier as well as on left payment amount, to be paid while sale deed registration.My query is ,as i have paid for a complete flat( as 90% amount paid), whether i have to pay the builder the service tax approached by him,as per the law.Kindly guide.

    • VIVEK BANEKAR

      i have gone for agreement of flat on oct 2010,I have paid 100% of the flat amount till jan 2011. our bulding is comepletd unit before july 2010.and flat owners are already
      possession there flats before me. agreement is registered however.The Builder at present is asking me to pay the Service-tax on the payments i made earlier whether i have to pay the builder the service tax approached by him,as per the law.Kindly guide.
      we are till waiting completion certificate. we all are 32 flat owners. but builder now demanding service tax for 8 flat owners who had agreement the flat after july 2010.

  • Uday Shankar Sinha

    I hv booked a flat in Oct.2009 & made an agreement of sale in Feb.2010 at Patna,Bihar.Flat completed in March 2011 & get registered in March 2011.Builder has taken as Service Tax @10.3% on one third cost of the flat(21L/3=7L*10.3%=Rs.72100).I hv already paid full consideration amount at the time of registration.Kindly guide me.

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  • Kiran Shingote

    My name is Kiran Shingote, I have purchased a flat in Bhosari, Pune. Building is under construction.
    Agreement of Rs 17 Lakhs dated 19/07/2011.
    is Service taxapplicable to me?
    In some articles I read no service tax appilcable if cost is below 20 Lakhs.

  • dayamay

    Hi,

    I have booked a flat in Kolkata.
    The total flat cost including garage parking area is 23,22,155 INR. My deverloper/promoter has asked me to pay the service tax of around INR 80,00 calculated on the amount of sale of the said flat.

    I have a little doubt on whether this service tax is supposed to be paid by me or it is entirely by the developer/promoter.

    Some sources say this tax has to be paid by the developer/promoter only and the customer or the buyer is not liable to pay this kind of service tax.

    Please, reply me. I am waiting for your response.

    Thanks
    Dayamay

    • dayamay

      In the above query the service tax amount is 80,000 INR , not 8000.

      Sorry for the mistake.
      Thanks
      Dayamay

  • ratish

    I have purchased a flat in April 2011 at Palghar which is under construction and made the agreement in Oct 2011. Total value including registration and stampduty and other misc charges builder told me it will be below 18.5 lakhs. Complex is under construction.
    Is Service taxapplicable to me?
    In some of the articles I read that no service tax appilcable if the cost of the property is below 20 Lakhs. Please help me with your reply. Thanks. Ratish

  • VDSBS RAO

    I have purchased a flat from owner share part with a worth of rs
    18,50,000/- Now builder asking to pay the service tax. Total flats in apartment is 30. How much amount I have to pay the service tax?

  • Sachin Patil

    i have purchased flat in 2010 november and i have gone to stay dec-10.flat was already ready condition.
    is service tax and vat is applicble to me?
    if yes ,how much?
    builder is forcing me to pay service tax.
    my flat is of Rs.12,80,000/-

  • ?? ?? ??????

    informative

  • http://taxworry.com/service-tax-flat-constructio/ shekhar

    i have purchased underconstruced flat in nagpur for Rs. 17,00,000/- and agreement to sale on dated 24/4/2011. Now, builder is asking for Service Tax Rs. 63,070/- , Vat Rs. 17,000/- and interest @ 18% Rs. 22,705/-. Please advice how much ST, VAT should i pay?

  • Ravi Narayan

    I booked flat @Rs1500000 on dec 2009.paid amount through housing lone till nov 12 in instalment. Igot position in nov 12. builder demanding 3.09% service tax of flat cost 1500000. What i can do.

  • bhushan

    Sir, I have registered my flat in june 28 2012 and got my possission on 29th.
    My buider is asking for VAT and SErvice tax (1%+3.09%) after 6 months. We have not still given him.
    But problem is that, he has has not given us possession letter (in writing) and mutation is not yet done in Nagpur corporation+NIT+city survey in Nagpur. Pls help and guide.

  • Deepak kumark

    Dear sir,

    I want to know that how much calculate service tax on flat basic price nd how much calculate service tax on other charge like as car parking, PLC,EDC, power backup, IFMS.
    Pls reply

  • Pradeep Wasankar

    I have bought a flat@35,00,000 and made full payment (500,000 my contribution+30,00,000 home loan) in October 2011 as building was completed constructed., giving finishing touch , I have got the possession on Apr’13 , Will I be liable to pay the service tax as I have made the full payment after completion of all the slabs.

  • Joydeb Paul

    Recently bough a flat total value of Rs.40,00,000/- (including Rs.3,00,000/- for the garage) .Paid an amount of Rs,33,00,000/- till date and rest Rs,7,00,000/- to be paid at the time of registration.
    Have the following queries-
    1) Do I have to pay service tax for the amount of rupees already paid for the under construction flat.
    2) Am I supposed to pay against the payment of Rs.3,00,00/- that have been negotiated for the car parking/garage.
    3) What will be the net service tax that is charagable that I need to pay my construction firm fro the payment of Rs.33,00,000/- already made?
    4) Do I have to pay for the balance Rs.7,00,000/- that will be paid to the construction firm at the time of registration.

    Please send me the details in reagrd ti the queries !

    Regards,
    Joydeb paul.
    Kolkata.