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Ritika (Software Engineer)     23 August 2011

Service tax on under construction property

Hi Sir

I have bought an under construction property in May 2010. The bank has issued the cheque to the builder on 30th June 2010, however builder is saying that we have to pay the service tax against this 30 lacs as the cheque got credited after 1st July 2010. I read that any payment done on or after 1st july 2010 is considered for service tax. Please suggest what should be done in this case.

Thanks

Ritika



Learning

 13 Replies

SURESH KUMAR PATRA (ADVOCATE MEDIATOR & TAX CONSULTANT)     26 August 2011

Ritika,

you won’t pay service tax on the entire amount. 67% of the amount charged by the builder is considered to be cost of land, materials, etc. Only the remaining 33% amount is considered as “service” provided.

So, you will have to pay 10.3% service tax only on 33% of the amount that you have paid. 

With Reards,

Suresh Kumar Patra

SURESH KUMAR PATRA (ADVOCATE MEDIATOR & TAX CONSULTANT)     26 August 2011

Ritika,

You won’t pay service tax on the entire amount as 67% of the amount charged by the builder is considered to be cost of land, materials, etc. Only the remaining 33% amount is considered as “service” provided.

So, you will have to pay 10.3% service tax only on 33% of the amount that you have paid. 

With Reards,

Suresh Kumar Patra

Ritika (Software Engineer)     26 August 2011

Thanks for the reply sir. Just wanted to confirm again.

My total cost of the house is 50 lacs and 30 lacs is been given to the builder on 30th June 2010. Now as per the rule i have to give service tax on remaining amount that is 20 lacs? Am i right sir? Or i have to give tax on 30 lacs as well. Please suggest?

SURESH KUMAR PATRA (ADVOCATE MEDIATOR & TAX CONSULTANT)     27 August 2011

Ritika,

If your total cost of the house is Rs.50 lacs, then the cost of land , materials etc. being Rs.33 lacs & 50  thousands (67%) and the remaining Rs.16 lacs & 50 thousands (33%) being considered as service provided is liable for service tax. I think now you will be clear.


With Regards,

Suresh Kumar Patra

Anumita Sarkar (Tax Advisor/Litigator)     31 August 2011

As a general principle, tax liability will be on the basis of construction services provided on or after 1-7-2010 and not on the basis of advance received. However, as per Notification No. 36/2010-ST dated 28-6-2010, in respect of service as per amended definition, if any advance payment was received prior to 1-7-2010, for service to be provided after 1-7-2010, service tax will be fully exempted.

Thus, if advance payment was received prior to 1-7-2010, service tax will not be payable even if service in respect of that advance is provided after 1-7-2010. For your reference, check the attached document.

Regards,

Anumita Sarkar

Advocate


Attached File : 130743 206170 1 trade facility no 1 2011.pdf downloaded: 368 times

Vineet (Director)     24 September 2011

Ms Ritika

 

If your builder has issued receipt of advance amount of Rs 30 Lakhs on 30th June, 2010, no service tax in payable in respect of the said amount. Credit of cheque is not material as you have evidence to prove that your bank issued cheque by debiting your loan account on 30th June. So insist on receipt dated 30th June and no service tax payable in respect of such advnace.

 

Coming to balance Rs 20 Lakhs, service tax @10.3% is payable on 25% of such amount i.e. on Rs 5 Lakhs. So effectively service tax payable will be Rs 51500/-.  Here I want to clarify Mr Patra that exemption to the tune of 75% of value has been provided in such case.

 

Hope this clarifies.

2 Like

shankar (self)     22 November 2011

Dear Respected Sir,

Can you please help me in providing your valuable inputs.

This is regarding the extra charges being imposed by the builder
during registration.
I have purchased a FLAT in Jan 2010 with Possesion Date of Dec 2010.

My agreement says only to pay 49,11,500/ + (Flat Charges + Maintenance Charges) and 2,00,000/-( Registration+Stamp Duty+Legal Charges) . NowI am asking for registration of the flat and the builder is asking to pay extra Govt. Levies@ 6.5% of 49,11,500 (i.e 3,19,248/-) which is not a part of my agreement. Also he is charging me the late payment charges of 2,06,628/- which is because disbursement got delayed from BANK. The builder did not send any demand letter to the bank to disburse the amount and there was no progress in the construction.The disbursement was on date basis and not on SLAB completion. The builder planned the dates in agreement in such a way that he knew the Bank processing would delay in disbursing the payment and he is now charging me...Till date he didnt turned up saying i need to do the late payment charges but now he is asking me....

My Agreement was done - Jan, 2010
Actual Flat Possession Date was - Dec,2010 (Still Not Given)
Current Situation - Not yet giving Possession Date and demanding more money

Answer my questions inline to my commments please...

Please let me know

1. What are 6.5% charges? Builder says the 6.5% charges are Govt Levis
 
2. As my Agreement was done  in Jan, 2010 but still am i liable to Pay the VAT and Service Tax?
if so what should be the break up?

 

shankar (self)     22 November 2011

Dear Respected Sir,

Can you please help me in providing your valuable inputs.

This is regarding the extra charges being imposed by the builder
during registration.
I have purchased a FLAT in Jan 2010 with Possesion Date of Dec 2010.

My agreement says only to pay 49,11,500/ + (Flat Charges + Maintenance Charges) and 2,00,000/-( Registration+Stamp Duty+Legal Charges) . Now I am asking for registration of the flat and the builder is asking to pay extra Govt. Levies@ 6.5% of 49,11,500 (i.e 3,19,248/-) which is not a part of my agreement. Also he is charging me the late payment charges of 2,06,628/- which is because disbursement got delayed from BANK. The builder did not send any demand letter to the bank to disburse the amount and there was no progress in the construction.The disbursement was on date basis and not on SLAB completion. The builder planned the dates in agreement in such a way that he knew the Bank processing would delay in disbursing the payment and he is now charging me...Till date he didnt turned up saying i need to do the late payment charges but now he is asking me....

My Agreement was done - Jan, 2010
Actual Flat Possession Date was - Dec,2010 (Still Not Given)
Current Situation - Not yet giving Possession Date and demanding more money

Answer my questions inline to my commments please...

Please let me know

1. What are 6.5% charges? Builder says the 6.5% charges are Govt Levis
 
2. As my Agreement was done  in Jan, 2010 but still am i liable to Pay the VAT and Service Tax?
if so what should be the break up?

 

shankar (self)     22 November 2011

Dear Respected Sir,

Can you please help me in providing your valuable inputs.

This is regarding the extra charges being imposed by the builder
during registration.
I have purchased a FLAT in Jan 2010 with Possesion Date of Dec 2010.

My agreement says only to pay 49,11,500/ + (Flat Charges + Maintenance Charges) and 2,00,000/-( Registration+Stamp Duty+Legal Charges) . NowI am asking for registration of the flat and the builder is asking to pay extra Govt. Levies@ 6.5% of 49,11,500 (i.e 3,19,248/-) which is not a part of my agreement. Also he is charging me the late payment charges of 2,06,628/- which is because disbursement got delayed from BANK. The builder did not send any demand letter to the bank to disburse the amount and there was no progress in the construction.The disbursement was on date basis and not on SLAB completion. The builder planned the dates in agreement in such a way that he knew the Bank processing would delay in disbursing the payment and he is now charging me...Till date he didnt turned up saying i need to do the late payment charges but now he is asking me....

My Agreement was done - Jan, 2010
Actual Flat Possession Date was - Dec,2010 (Still Not Given)
Current Situation - Not yet giving Possession Date and demanding more money

Answer my questions inline to my commments please...

Please let me know

1. What are 6.5% charges? Builder says the 6.5% charges are Govt Levis
 
2. As my Agreement was done  in Jan, 2010 but still am i liable to Pay the VAT and Service Tax?
if so what should be the break up?

 

rridhima gosain (manager)     19 July 2012

Hi sir, I entered into agreement with my builder on 22nd june 2010.My housing loan was disbursed by HDFC Ltd for an amount of Rs 26lacs on 30th june 2010 and the cheque of the same was handed over to my builder on 1st july 2010. Now the Builder wants me to pay 2.58% Service tax on the amount of 26lacs, which as per my understanding , he is not at all liable. for two reasons1) the amount has already been sanctioned by HDFC Ltd on 30th June 2010 and secondly, Servie tax is payable on the payment recd on or after 1st July

Also whetehr he can claim 2.58% on the whole amount of 26 lacs?

Thans

CA. Vikash Dwivedi (Chartered Accountant)     24 July 2012

@ Vineet, Are you sure the rate is 10.3%?

CA. Vikash Dwivedi (Chartered Accountant)     24 July 2012

SANJAY KUMAR (Lawyer)     29 July 2012

Sevice Tax has lately acquired my attention.on the face of it appears not to be a very complex domain. For example: 1st July every year it assumes as crucial date for reckoning ST. Again,  buildings, construction of complexes, civil structure or a part thereof,renting of immovable properties -- all these services they categorise as declared services and  ST is flat 12 % effective 1st July 2012 on the value of that service.

As far as Value of a Service is concerned it is what one is billed at through invoice excluding ST component. Yes Complexity may arise in matters where provision of service is for consideration which is not ascertainable.Then here, one is proded to arrive at a amount through prescribed manner. I hope just by being a bit aware of its provisions with reference to the letter of the Finance Act all its complexities will vanish. 


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