Service tax for an under construction flat in an apartment

If you are looking to buy a flat, you must also budget forservice tax and Value Added Tax (VAT) in addition to the purchase price and stamp duty. Service tax is applicable on under-construction flats Since the flats are under construction, there is an element of 'construction service' in the agreement between builder/developer and purchaser. Hence, it attracts service tax. While service tax is charged at 12.36 per cent, in case of under construction flats, the effective rate works out to 3.09 per cent of the value of property. This is because service tax is not applicable on the entire purchase price.  For agreements entered towards construction of flats after March 2013, service tax is payable at 3.71 per cent per cent where the flats are above 2,000 sq ft or cost more than Rs 1 crore. Any charges towards additional facilities such as maintenance, car parking etc, would also attract service tax.