Capital gain and 1% vat introduced in recent budget
Sunil
(Querist) 25 May 2013
This query is : Resolved
Recently I purchased a flat which is under construction. Apartment is being built as per Joint Development Agreemet(JDA) between landlord and developer. As Per JDA ownership/title of the apartment units are divided between Landloard and Developer (43:57). I'm paying price the break up of which is same as how builder is charging. 1) Since I'm purchasing from Landlord share, i guess Landlord will not be paying VAT and ST (I guess he will pay capital gain?) Right?. 2) In this case how will recently introduced new law about 1% TDS cut be applicable to me?or the transaction will be treated same as second sale?
Sankaranarayanan
(Expert) 25 May 2013
From start of June 2013, taxes at the rate of 1% would be required to be deducted (TDS) by every purchaser of an immovable property, other than agricultural land, while crediting or making payment to a resident seller, if the consideration for such immovable property exceeds Rs 50 lakhs. This requirement may lead to additional withholding compliance burden on purchasers and would negatively impact the working capital requirements of sellers/ developers.
On the indirect tax front, post 1st March 2013, purchase of luxury houses will become dearer. The reduction in service-tax abatement rate from 75% to 70% would increase the effective service tax rate from 3.09% to 3.71% on pre-construction sale of residential units having carpet area of more than 2000 sq ft and where the amount charged for the unit is Rs 1 crore or above. This would lead to increase in the overall cost which would borne by the buyers. However, it is to be noted that service tax continues not to apply on transactions involving buying-selling of constructed houses/ property as there is no service element involved in such transactions.
Sunil
(Querist) 27 May 2013
Thanks Sankarji. However my question is how will my transaction be treated in the light of 1% TDS law introduced recently. Given the fact that -
1) I've purchased from Landlord share of units who is not involved in construction activity.
2) Per JDA, Developer will bore all the expenses related to construction including statutory expenses.
3) Per my agreement with Landlord, i'll pay 50% towards undivided share of land and 50% towards purchase of apartment unit.
4) I don't have to pay anything to developer (except Maintenance fee/Club house charges at the end of construction).
5) Per cost break up given to lending bank, I'll only be paying Flat Cost + Car Parking + KEB/BWSSB to landlord. So where is the question of VAT & ST?
Thanks for your help.
