Service tax on under construction property

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

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

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?

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

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

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.

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

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

for detailed info on ST on under constrution flat read:

https://www.lawyersclubindia.com/forum/Clarification-vat-amp-service-tax-on-construction-services-62601.asp

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.