Service tax and sales tax for under construction property

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  1. TSSGVenkatesh#14

    TSSGVenkatesh#14 New Member

    Hi, I am planning to buy a flat but the seller given sales tax and service tax in his quotation. When we asked clarification, it has been said by the seller that both taxes applicable for under construction property. But I hope to my knowledge sales tax will not be applicable for under construction flat. Can anyone help in this regard and send me the GO for exemption of service tax , if exemption available ? thanks in advance...
  2. rudrabose

    rudrabose Active Member

    Sales Tax/VAT is a state level subject and some states do levy this tax on property as well.
  3. Gaurang Agarwal

    Gaurang Agarwal New Member

    Construction of an under construction property is treated to be a "declared service" provided by builder and thus you are liable to pay service tax on it @3.09%
    While Sales Tax/VAT is concerned , some states do charge VAT on purchase of under construction property. In a case between L&T and State of Karnataka, the court announced the verdict that the pre-construction agreements of sale of immovable property qualify as "works contract". Hence, VAT is payable on all transactions dealing with under construction properties.
    Sriradmoss and gaurav_kumar like this.
  4. Sriradmoss

    Sriradmoss New Member

    I want to know the Service tax a charges for a villa which is under construction around 2200sqf and cost of villa is : 1,62,00,000 (land and construction cost).
    The builder is asking to pay 4.944% and he is saying the service tax got revised.

    Appreciate your help in this regard Sir..
  5. Gaurang Agarwal

    Gaurang Agarwal New Member

    @Sriradmoss : Actually there is a little confusion on such situation..
    In case if the builder had issued an invoice which is clearly seperating the value of land with the value of service then such construction will be treated as execution of work contract and service tax @4.944% will be applicable only on the value of service provided by him.
    In case if the value of land is not seperated in invoice then Service Tax will be applicable as following:
    Flats having an area above 2000 Sqft OR price more than 1 crore : 3.71%
    Other cases: 3.09%
    For more details read through this link:
    THANK YOU :)
  6. Prudhvi

    Prudhvi New Member

    Do we need to pay this 4.944% service tax to the builder at the time of registering our property or every time you pay your payment installments to the builder. My property is not ready in terms of construction and the builder is asking us to pay the service tax amount for all the previous payments i made till now.

    Please let us know

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