Regarding service tax

[Prateek Agrawal]

Dear Sir.

I booked a flat in Bhopal from Bhopal development authority in the year 2011 and paid installment as per terms & condition up-to 2013 to the tune of ₹ 4860000/- . Total cost of flat ₹ 6350000/- BDA has issued a demand letter and asking for remaining amount . The BDA classified cost of land and construction cost. on the remaining amount they are charging GST @ 12 % and also charging service tax @ 4.5% on ₹ 4860000/-installment paid by me. My question is that whether they can charge service tax @4.5% on installment paid by me .Service tax is chargeable @ 3.75% on gross value instead of 4.5% as the value of property is less than 1 cr. and assuming carpet area less than 2000sqft.

[KASTURI SETHI]

Emphasis is on Service Tax period.

You are concerned with Notification No.26/12-ST dated 20.6.12 as amended vide Notification No.9/13-ST dated 8.5.13.(Serial No.12 refers.) The issue involved is whether abatement of 75 % or 70% from the gross receipt is admissible to you. In view of carpet area being less than 2000 Sq. Feet and value being less than ₹ 1 crore, Service Tax is payable on 25% of the gross amount. Thus you eligible for abatement of 75% . Both conditions are required to be satisfied/qualified to claim abatement of 75% and payment of Service Tax on 25% of the gross amount charged

. Are you sure that you fulfill both conditions ? In case carpet area is less than 2000 Sq. feet but consideration exceeds Rs.one crore, ST will be payable on 30% of the gross amount charged. In other words, abatement of 70% will be admissible in that situation.

From 1.6.16 to 30.6.17, rate of ST was 15% (ST 14%, SBC 0.5% KKC 0.5%).

AI Summary

Service tax abatement for residential property: eligibility determines taxable portion of gross receipts under specified notifications. Service tax abatement depends on concurrent satisfaction of carpet area and value conditions: if carpet area is under 2000 sq ft and consideration is below the value threshold, a 75% abatement applies and service tax is payable on 25% of gross receipts; if carpet area is under the threshold but consideration exceeds the value threshold, a 70% abatement applies and service tax is payable on 30% of gross receipts. Apply the composite service tax rate for the relevant period to the taxable portion.