He is being adamant on the FD. Basically one needs to have an FD and create a lien for that FD in his favor. FD is 4% of agreement value for the VAT.
I am not sure if such a move is legal, but it is unfortunate that he springs this just before posession and says he will not hand over possession unless the FD is in place even if you have paid all the money.
Regarding Service tax look the link from the budget
http://indiabudget.nic.in/ub2010-11/cen/dojstru2.pdf
It is still not clear what is applicable and how they will calculate.
Regards