Service Tax if separate agreement for Construction & Land

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    HARIBABU New Member

    Hi ,
    I bought an under constructed villa for about 50L . The price of the land is 10L , and remaining 40L is the construction cost . I have registered land on my name and made a seperate construction agreement with the builder for 40L . Now the builder asking me pay service tax of 25% of [email protected]=1.545L, the query is
    i) Do we need to pay service tax for both for land and construction or only for construction .Unlike apartments which they sometimes charge for both land and construction , is it the same for villa also . The only difference between villa and apartment is land will be registered in our name in case of villa and in apartment it is not .

    ii) For what price i should pay the service tax , is it 25% of [email protected]% ( i.e construction only) or 25% of [email protected]% (i.e land +construction)

    iii) Any suggestions to reduce the amount of service tax to be paid .
  2. gaurav_kumar

    gaurav_kumar Well-Known Member

    If it is a composite contract wherein no separate agreement is enterred into for construction, then you only have to pay Service Tax on 25% of the total amount i.e. Rs. 50 Lakhs in your case

    However, in case a separate contract is made for construction - you would only be required to pay Service Tax on the construction amount i.e. 40 Lakhs in your case. But in this case, full service tax would be levied i.e. 12.36% of 40 Lakhs.
    HARIBABU likes this.
  3. Shishir Nayak

    Shishir Nayak Member

    I agree with @gaurav_kumar
    If you follow law than you have to pay 4.944 lakh that is 12.36% of 40lakh because you have made a separate agreement. So i ll suggest you to go with builder as you have to pay only 1.545lakh

    As you have not given details about your residential unit i cant suggest further deduction but i would like to tell you that you can avail exemption if building is single residential unit.
    HARIBABU likes this.

    HARIBABU New Member

    Thank u gaurav ,

    Shishir ,

    My villa is a duplex house with ground and first floor . It is in a gated community .
    Does this consdered as a single unit ? Can i avail exemption ?

    Hari .

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