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Tax applicability on flat purchases

(Querist) 07 November 2013 This query is : Resolved 
I have booked a flat 2 years back at Palakkad (kerala stat) which is likely to be handed over for possession by December and the builder is charging 5.60 % as Tax (Approx 142551) - apart from registration expenses, on total cost of approx Rs.25.50 lacs including car parking. Please advise the tax applicability like Service Tax/VAT applicable in Kerala since no such things were mentioned in the agreement.

It is specifically mentioned in the agreement that the advances paid will be apportioned as advance on property sale consideration and is not for any construction contract or building contract at any point of time.
Vidhi Joshi (Expert) 07 November 2013
state location.
Rajendra K Goyal (Expert) 08 November 2013
Stilt parking can not be sold hence no tax can be charged on this amount. Taxes are imposed by the Govt. and has to be paid as per provisons of law.
Prasad (Querist) 08 November 2013
It is at Palakkad, Kerala State. It is specifically mentioned in the sale agreement that the advances paid will be apportioned as advance on property sale consideration and is not for any construction contract or building contract at any point of time.


BAALASUBRAMANNYAMM (Expert) 08 November 2013
you could search the site and gain some knowledge about it.
www.commonfloor.com/guide/servicetax on underconstruction company
Prasad (Querist) 15 March 2014
Please advise if applicable, how VAT (percentage) is calculated. Also advise if balance payment made after project completion, whether VAT will be applicable for that part.
R.V.RAO (Expert) 25 March 2014
service tax

flats sold by a builder, after obtaining completion certificate will not attract service tax.

the reason is there is only sale of a completed flat but no service .
sale attracts vat but not serv.tax.

in case your builder has not yet obtained completion cert. but sold the flat to you(under construction) ,then you are liable for serv.tax @12.36% of 25%of flat sale value (as per your regd.sale deed),payable by you at the time of registration of under construction flat.

AS SAID above, vide serv.tax notification no 26/12 wef 01/7/12, there is an abatement of 75% on value liable for serv tax.in other words,THat is why ,you are liable to pay serv.tax @12.36% , only on 25% of value of your sale deed price of the property(flat), as said above.

further pl. note builders take cenvat credit on input serv.

So,depending on your negotiating skills,a further 5% abatement is possible if you/ all the affected persons like you in your apartment complex can negotiate with builder, for addl. abatement of another 5%.
so you get 80%abatement and serv.tax payable on 20% of value of your flat(as per regd.deed value).

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%

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
Rs one crore.


vat

According to a recent verdict by the Supreme Court, the sale of a property that is under construction would be liable to value-added tax (VAT).

The ruling could have far-reaching ramifications for the real estate industry as well as property buyers. In the case of L&T versus State of Karnataka, the apex court held that the pre-construction agreements for sale of immovable property would qualify as 'works contract' and, therefore, VAT would be payable on the transaction.
vat being a state subject varies from state to state.
pl. find out vat rate in kerala.


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