Builder liable for Service tax or VAT

H.M.Patnaik (Querist) 20 November 2010 This query is : Resolved
Dear Sir,
After going through the reply given by Mr. Ramachandran,I am drawing your attention to a situation where share of impartible estate is registered in the name of co-owner of the building -units wherafter, the developer executes actual construction of the Apartment/ flats and in due course of time handsover possession of the dwelling unitsfor an agreed price which is a indivisible contract. In this case, it is difficult to draw a dividing line between the cost of material utilised in each unit and service charges as envisaged in the indivisible contract.
Pl. advise how treat the agreed consideration,

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adv. rajeev ( rajoo ) (Expert) 20 November 2010
While purchasing the materials builder will be charged VAT. He does not sell the materials and he is not a trader. The building constructed by a builder is not a goods.

Khaleel Ahmed (Expert) 20 November 2010
No

R.Ramachandran (Expert) 20 November 2010
Then that case it will fall under "Works contract". The material portion will be charged to "Works Contract VAT" and service portion would be charged to "Works Contract Service Tax".
If the builder is not able to segregate between labour and material, then many of the State VAT Acts provide a % method to segregate between materials and service. The same value can be adopted for paying service tax also.

Kirti Kar Tripathi (Expert) 20 November 2010
This is very peculiar situation, but you may go for Mr. Ramachandran advice.

H.M.Patnaik (Querist) 21 November 2010
Mr. Ramachandran,
Thanx for the analytical reply.

Regards
H.M.Patnaik

soumitra basu (Expert) 21 December 2010
I think you will be entitle for abatement either 67% or 75% on the Gross Bill.

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