service tax and vat for flat

Vikas (Querist) 28 May 2014 This query is : Resolved
Hello Sir,

I purchased a flat in Pimple Saudagar pune and the flat agreement to sale with the builder was done in July 2009.
Out of total property cost, I paid the own contribution amount Rs. 350000 to builder at the time of agreement.
Further I paid additional Rs. 150000 to builder in August 2010.
The flat possession was expected on December 2010 but due to some issue, I didn’t get it.
Most of the flat owners in the building/scheme got the possession in March 2011. However, few of us got stuck as the revised sanction plan was not approved by the authority.

The pending issue was resolved now and builder got the approval and completion certificate in April 2014.
I took the housing loan and paid the remaining balance of Rs 1600000 on May 25, 2014.

Now builder is demanding VAT @ 1% on Rs 1600000 and Service tax @ 3.09% on Rs 1750000 (1600000 + 150000).
Also the Society is already formed now but still builder is demanding 1 year society maintenance charges of Rs 25000.
I have already paid the Society formation charges.

Please advice me as per recent law or rule,
1. Now in this case am I liable to pay VAT and ST on the payments made after completion certificate?
Or actually how much service tax and VAT should be paid as per current law/rule?

2. Do I need to pay society maintenance charges now?

Regards
Vikas

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R.V.RAO (Expert) 29 May 2014
present rate of vat in maharashtra 1%, on Res.flats(under construction flats).

serv.tax@3.09%is calculated as 12.36% of 25% value of the under construction (Residential) flat.
(The 75%reduction in flat value for serv.tax purpose is called abatement )

For availing the service tax abatement of 75%, following two conditions should be fulfilled.

1.)the area of the res.flat should be lesser than 2000 sq.ft and value less than one crore rupees.

2.)land value must have been included in flat cost.

if you have purchased the flat after the builder obtained a completion certificate from the statutory/ competent authority , no need to pay for serv.tax,as flat is not under construction.
but your query states you have entered into an agreement for purchase of under construction flat and started part payments from time to time,and therefore serv.tax is applicable .no split is allowed like payments made before and after completion cert.
as to timing of payment of these taxes, note that unless you pay both serv.tax and vat, before the flat registration, the flat regn. will not be done in your name.

In other words,you must pay serv.tax and vat before registration of the flat in your name.
Only after the flat is registered, in your name, you become owner of the flat ,and from that date,you are liable for flat maintenance to the society if it is already formed on that date or else to the builder if no society on that date.

Raj Kumar Makkad (Expert) 29 May 2014
I do endorse the wise advice of expert Rao.

Rajendra K Goyal (Expert) 29 May 2014
Agree with the expert RV RAO SIR,

R.V.RAO (Expert) 30 May 2014
thanks to sri raj kumar makkad ji and sri rajendra goyal ji.

Vikas (Querist) 30 May 2014
Thank you very much :)

T. Kalaiselvan, Advocate (Expert) 31 May 2014
I too endorse expert Mr. R.V.Rao garu's detailed and proper explanation to the query, which will answer many people waiting in the queue with such perturbed queries.