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Old September 16 2012, 04:00 PM   #1
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Default VAT and Service Tax for Flat in Bangalore

Hello All,

I have booked a flat in Bangalore. Here are the cost break up.

Total cost (Including Car parking): 2850000
Car Parking charge: 165000
Payment made by me till date: 600000 (of which 350000 has been mentioned in the Construction agreement.
Payment made by bank (as I took loan): 420000
Proposed date of Possession: March 2013
Sale/Construction agreement executed on: 01.06.2012
Location: Bangalore

I had registered the flat in my name before completing costruction of the flat due to some bank norms and started with the EMI payment.

Now the builder is asking me to pay the VAT and Service taxes. I heard VAT is 5% and Service tax is approx 2.5%. I would like to know how the VAT and Service taxes are calculated by considering the figures mentioned above (Also, i m confused whether its calculated on Costruction Agreement/Sale Agreement values).

Also, please do let me know the documents that I can/should demand to my builder on VAT/Service Taxes

Thank to All.
Faddy

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Old September 22 2012, 12:53 AM   #2
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VAT 5% is correct. Thats what I remember. Service tax I do not remember which is also looks appropriate. This is norm and your builder should have told you upfront
 
Old September 23 2012, 12:41 AM   #3
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Can you tell me 5% VAT is on which of the above mentioned amount?
 
Old September 24 2012, 09:42 PM   #4
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Ok I have validated. As per my knowledge VAT s 4% and Service tax is approx 5% of the total cost of the flat (Unit Price, Car Parking, Power/Water, Generator, Club etc whatever you pay to the builder) This does not include Regn, Maintenance etc as I understand
 
Old September 25 2012, 12:05 PM   #5
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VAT is 5.5% and ST is 3.09%.
 
Old January 18 2013, 05:01 PM   #6
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Quote:
Originally Posted by fahadibm View Post
Hello All,

I have booked a flat in Bangalore. Here are the cost break up.

Total cost (Including Car parking): 2850000
Car Parking charge: 165000
Payment made by me till date: 600000 (of which 350000 has been mentioned in the Construction agreement.
Payment made by bank (as I took loan): 420000
Proposed date of Possession: March 2013
Sale/Construction agreement executed on: 01.06.2012
Location: Bangalore

I had registered the flat in my name before completing costruction of the flat due to some bank norms and started with the EMI payment.

Now the builder is asking me to pay the VAT and Service taxes. I heard VAT is 5% and Service tax is approx 2.5%. I would like to know how the VAT and Service taxes are calculated by considering the figures mentioned above (Also, i m confused whether its calculated on Costruction Agreement/Sale Agreement values).

Also, please do let me know the documents that I can/should demand to my builder on VAT/Service Taxes

Thank to All.
Faddy
1. Be smart ...Builder will pay the taxes only on the registerd value not on the whole price .....so negotiate well

2. As per rules no builder can sale Car parking .......so no service tax on car park ...while 99% of builders charges the same to purchaser ...be smart

3.
 
Old January 18 2013, 05:02 PM   #7
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Quote:
Originally Posted by fahadibm View Post
Hello All,

I have booked a flat in Bangalore. Here are the cost break up.

Total cost (Including Car parking): 2850000
Car Parking charge: 165000
Payment made by me till date: 600000 (of which 350000 has been mentioned in the Construction agreement.
Payment made by bank (as I took loan): 420000
Proposed date of Possession: March 2013
Sale/Construction agreement executed on: 01.06.2012
Location: Bangalore

I had registered the flat in my name before completing costruction of the flat due to some bank norms and started with the EMI payment.

Now the builder is asking me to pay the VAT and Service taxes. I heard VAT is 5% and Service tax is approx 2.5%. I would like to know how the VAT and Service taxes are calculated by considering the figures mentioned above (Also, i m confused whether its calculated on Costruction Agreement/Sale Agreement values).

Also, please do let me know the documents that I can/should demand to my builder on VAT/Service Taxes

Thank to All.
Faddy
Service tax and VAT is only on under construction flat ( for which occupancy certification have not been received yet ) ..
 
Old January 18 2013, 05:03 PM   #8
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Quote:
Originally Posted by blorebuddy View Post
Ok I have validated. As per my knowledge VAT s 4% and Service tax is approx 5% of the total cost of the flat (Unit Price, Car Parking, Power/Water, Generator, Club etc whatever you pay to the builder) This does not include Regn, Maintenance etc as I understand


Service tax is not applicable on Car Parking ...pls correct
 
Old January 18 2013, 06:10 PM   #9
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Default Service Tax [3.09%]

Quote:
Originally Posted by rupeshvyas View Post
Service tax is not applicable on Car Parking ...pls correct
Ideally its not chargeable.

Below is already posted in so many posts of this city
Before posting, please explore existing threads.

<<<<< POSTING IT AGAIN HERE >>>>>>>>>

Few days Back we have received a Comment from a reader that he has Booked a Flat and his builder is asking him to pay Installment in advance to save service tax as it is going to be increased from 01.07.2012" But the Fact is totally on reverse side. The fact is that service tax effective amount payable by developer is reduced and this benefit must be passed on to the buyer by reducing the rates of the Buildings etc.

Hold on ....I know that every body is anxious to know the detail and Notification number by which this reduction in effective rate has been done.Details is given below.


Service tax on activity of developers of selling the building or part of the building to be constructed on advance payment (usually construction linked payments) was made subject to service taxunder the category of “Commercial or Industrial Construction Services” and “Complex Construction Services” w. e. f. 01.07.2010.

Now, w. e. f. 01.07.2012, in negative list regime, activity undertaken by developers have been included as declared service in clause (b) of section 66E of Finance Act, 1994.


Huge Benefit in the form of CENVAT Credit: Prior to 01.07.2012 also, rate of abatement was same i.e. 75% and taxable portion was 25% of gross amount (including land cost). However, earlier there was absolute bar on availment of CENVAT Credit.

However, now, CENVAT Credit in respect of capital goods and input services (as defined under rule 2 of CENVAT Credit Rules, 2004) has been allowed w. e. f. 01.07.2012. (CENVAT credit in respect of inputs shall not be allowed).

Usually, developers get the construction done from a construction contractor who charges service taxfrom developers in respect of construction services provided to developers.

Now, CENVAT Credit in respect of capital goods and input services (including construction service received which is a substantial expenditure) shall be allowed.

Now, developer shall continue to charge service tax from their customers, however, they will now avail CENVAT Credit and deposit lesser amount of service tax in cash after availment of CENVAT Credit. In other words, amount equivalent to CENAVT credit availed by developers will be net saving for developers.

Thus, developers discharging service tax must place a system for availing the CENVAT Credit as per the provisions of CENVAT Credit Rules, 2004.

Example: A Flat is sold for 10,00,000 including land value.After abatement of 75 % ,service tax on 25 % value @12.36 % Rs 30900/-charged by builder. As per notification 26/2012 given above,while depositing the collected service tax amount from the consumer ,Developer can claim cenvat credit on capital goods used and cenvat credit on services .

Suppose Input Capital goods used and input services received to construct this flat is worth Rs 2 lakh. Cenvat credit available on 2 lakh 12.36% is Rs 24720. So Developer /Builder is required to pay balance only Rs 6180(30900-24720).

After this amendment 26/2012 , there is a direct benefit to builder/developer. In the given example benefit is of 80 % of the service tax collected from consumer . This benefit will increase / decrease with increased used of capital inputs and Input services in construction activities.In few case nothing is payable by developers.

So technically developer/builder should pass on this benefit to consumers.

Information for all Contractor/Builder/developer :We are informing this to all contractor/ developer /Builder so that they can avail this benefit so pay correct reduced amount of service tax to Govt.

Information for all Consumer and prospective Buyers :And most importantly to the consumer/Buyer of the Houses /flats etc so that they can know that in fact service tax liability of contractor/ developer is reduced in construction services after 01.07.2012 so that they can renegotiate their rate with the Builder/contractor/ developer.

Hope you will find the above useful.

Sumitra.
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Old January 18 2013, 11:12 PM   #10
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My two cents on how service tax should be calculated. There are two aspects regarding levying of service tax on property under construction anywhere in India.
a) Gross value of property in the agreement includes the cost of land (UDS cost)
b) Gross value of property in the agreement does not include the cost of land (construction service cost is calculated separately)


If we consider each scenario separately:
a) Gross value of property in the agreement includes the cost of land (UDS cost): In this scenario, government gives relaxation to the tune of 75% of applicable rate. This means that tax will be levied only on 25% of gross value of residential unit. Effectively this works out to 25% of 12.36% i.e. 3.09% Service Tax rate on the gross value (including UDS cost, floor rise, preferential unit cost, maintenance & club charges, but specifically excluding car park allotment charges)


b) Gross value of property in the agreement does not include the cost of land (construction service cost is calculated separately): In cases where there are 2 types of agreements (land & construction service) , relaxation is given to only 67% of applicable rate on construction service component. Effectively this will work out to 33% of 12.36% i.e. 4.08% Service Tax rate on the gross value of construction service agreement (components remain the same as above).

Please note that in both situations, VAT rate of Karnataka (believe that is 5.5%, could somebody pls confirm that???) will be applicable. Also as Sumitra rightly pointed out, since CENVAT Credit is now available to builders on construction material used, he should be able to pass on that benefit to us, so the effective rate will be lower than the ones specified above (however we need to confirm whether any builder in Bangalore has passed on this CENVAT credit to the buyer so far).
gjmz7x, rupeshvyas and am1978 like this.
 
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