Service tax on purchase of flat

rajib (Querist) 12 February 2014 This query is : Resolved
sir,
I had booked the flat in Dec 2008 & it was under construction. While booking the flat in the agreement between builder & self ,there was no mention that I have to pay service tax .now once registration of sale deed has to be done ,am I liable to pay service tax on the flat.kindly reply.

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Devajyoti Barman (Expert) 12 February 2014
Payment of service tax has become mandatory while purchasing a flat.

T. Kalaiselvan, Advocate (Expert) 12 February 2014
I agree with expert Mr. Barman that the payment of service tax is mandatory on purchase of flat.

Rajendra K Goyal (Expert) 13 February 2014
Whether the flat when booked was under construction or constructed or construction was not started?

R.V.RAO (Expert) 13 February 2014
flats sold after obtaining completion certificate by the builder will not attract service tax.

the reason is there is only sale but no service .
sale attracts vat but not serv.tax.

i understand that in your case registration of flat is not complete yet.
if your builder has already obtained completion cert., and then after wards if sale deed is registered in your name by the builder, you need not pay serv.tax liability.
but after your flat registration is completed ,then if the builder obtains completion cert. you attract serv.tax liability.
however there is silver lining for you vide serv.tax notification no 26/12 wef 01/7/12,where by there is an abatement of 75% on value liable for serv tax.in other words,yo are liable to pay serv.tax @12.36% on 25% of value of your sale deed price of the property(flat).
further since builders take input tax credit for capital goods etc..,a further 5% abatement is possible if all the affected persons like you in your apartment complex can negotiate with builder.
an example is given below.
if the registered sale deed value of your flat is Rs.30 lakhs ,you are liable to pay serv.tax( @12.36% on Rs6 lakhs ie20%of Rs30 lakhs. )of Rs 74160/- only.

i presumed you will convince your builder for an abatement of 80% of sale value and pay serv.tax only on 20% sale value@12.36% including edu.cess of 3%

R.V.RAO (Expert) 13 February 2014
an addendum to my above reply :
service tax abatement of 75%is provided by above serv.tax notification in respect of flats with carpet area of less than 2000 sq.ft and also of value of less than
Rs2 crores.