M Sabin Mathew TO 1 recipient Service tax on buying an under construction flat in bangalore

[Asked by Guest]

Sir,

I am planning to purchase an under construction Flat in Bangalore. I got the draft copy of the sales agreement (Dual agreement). As per the agreement base price (price / sqft * super built up) is 33Lakhs (the UDS of Land value is 8 Lakh and the cost of construction is 25 Lakhs).As per the Builder sales tax (VAT) @ 9.5% of 70% Basic and Car Park Value [9.5%*(70%*(3304800+150000)) = 229744] and service tax 12.36% of 30% of Basic and Car Park and other charges [12.36%*(30%*(3304800+150000)) = 128104].

Could you please tell me whether the formula to find the service tax and VAT is true? I understand the builders are not suppose to calculated the Service Tax on the base price and it should be on the cost of construction.

Thanks in advance

[sanjeev bajaj]

As for as Service Tax is concerned, there are the following two methods:-

 

1. Service Tax @ 12.36% on service portion in the construction cost i.e.

    Labour cost plus portion of profit on labour cost

2. Service Tax  @ 12.36% on 25%  of the total value, if carpet area is less than 2000 Sq Ft. or amount charged is less than Rs. 1 Cr.

AI Summary

Service tax on construction services: payable on labour/service portion or on a specified portion of total value for small units.
Buyer questioned a dual agreement allocation where VAT applied to 70% of basic price plus car park and Service Tax to 30% and other charges. Adviser explained Service Tax may be levied either on the service component of construction (labour plus profit on labour) or on a prescribed percentage of total consideration where the unit meets specified area or value thresholds.