service tax and vat on bangalore property 2014

Savitha (Querist) 16 September 2014 This query is : Resolved
I have bought an under-construction flat of land-owner share in Bangalore , with sale agreement value of 3500000 (basic + car park). Registration was done with total cost of 20,18,000 as sale consideration.Flat is still not ready.The builder has calculated ST & VAT at 8.59% of (flat value + car park + amenities + BWSSB + BESCOM). Is this right ? Is 8.59% the right percentage and is he supposed to calculate it on all the items I have mentioned? Or is it to be calculated on sale agreement value or is it on the sale deed value?In the end, how does the government recover VAT and ST from the builder/land-owner(based on which values)? Please note my flat is land-owner share.

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T. Kalaiselvan, Advocate (Expert) 25 September 2014
You may better consult a local tax law practitioner who will be able to render proper opinion to your query.

Anirudh (Expert) 25 September 2014
1. First you have to ask his (i) service tax registration number and (ii) VAT Registration number.

2. You have to ask him whether he is paying the VAT and Service tax on 'composition' scheme.

3. Even if the builder does not give you proper answer for query No.2, you have to visit the Commercial Tax Authorities in your city and enquire about this VAT Registration and find out whether the builder is paying VAT on 'composition' basis or on material particulars basis.
If he is paying on 'composition' basis then he is not, as per law, entitled to charge and collect the VAT separately from the buyer.

4. Similarly, please visit the Service Tax Authorities (coming under Central Excise, Customs and Service Tax Department) in your City. Make similar enquiries as at 3 above. If he is paying service tax under 'composition scheme' again, as per law, he is not entitled to charge and collect the Service tax separately from the buyer.

5. In case he is not under 'composition scheme' the service tax and VAT at applicable rate is payable on all the items. That is VAT on material portion and Service tax on Service portion. Naturally, in the entire construction work done for you major portion would relate to the materials used viz., cement, steel, wood, tiles, paint, etc., etc and a slightly less portion to the service i.e. actual labour and supervision. Depending upon that you have to pay the VAT and Service Tax.

6. But since he is charging 8.59%, I have reason to believe that he is paying both VAT and Service tax on 'composition scheme' and he is trying to collect the said tax from you, even though he is not legally entitled to charge and collect.