Vat and service tax on property in maharashtra

kalim (Querist) 30 May 2014 This query is : Resolved
I have query regarding applicable VAT and Service tax on property.

I have purchased flat in Pune, Maharashtra. Agreement was executed on 26th Apr 2010 and I got the possession in Jun 2010. also have a possession letter with no due mentioned in it.

As per my understanding VAT and service tax issue was for Apr 2006 to Mar 2010 period, after Mar 2010 there was not court case etc. Back dated tax collection was done for this period only, please let me know if I am wrong.

After these many days builder has sent me letter demanding Rs. 1,43,000 for VAT and Serive tax. My Agreement amount is 27L.

Can you please tell do I really have to pay this or builder is just trying to milk more money out of me?

Please advise

Kalim

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T. Kalaiselvan, Advocate (Expert) 01 June 2014
In Maharashtra, VAT at one per cent of the agreement value is payable at the time of registration of the sale agreement. However, VAT is not payable in case of purchase of a property from the developer, after the construction is completed and completion certificate is received.
Service tax is payable only on the construction component and not on the value of the land. Since in most cases, it is difficult to ascertain the cost of land and construction cost separately, the government has come up with the abatement scheme. Under this, abatement (relief) is given for 75 per cent of the value of the property, and service tax is levied only on the balance 25 per cent. This effectively brings the service tax rate down to 3.09 per cent. However, this abatement is not available in case of preferred location charges, floor rise charges, internal and external development charge (like infrastructure development charges), club house charge, etc., in which case service tax at flat rate 12.36 per cent is payable.
Like VAT, service tax is not payable, in case the property is purchased from the developer after the construction is completed and the completion certificate is received. Though, these taxes are paid by the developer, they are built into the cost and passed on to the buyer.