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What was the rate of service tax & vat on property in 2016
26-Jun-2023 (In Tax Law)
I bought a flat with a circle rate of 5464000/- A payment of Rupess 1300000/- was given to the builder by cheque in febuary 2016 against the same property. Builder is demanding service tax and vat on 1300000/- What was the rate of service tax & vat in 2016 and what would be the amount of tax shall i need to pay on 1300000/- ?
Service tax and VAT are applicable, only on properties that are booked at under-construction stages. So, both these taxes cannot be levied on properties that are purchased, after the builder has obtained its completion certificate. Similarly, there is no service tax or VAT for completed properties that are purchased under resale.
The law allows you to opt for 30% of the value of the agreement as the service component, and pay the service tax on that portion. Hence, the levy of service tax effectively comes to 4.50% (i.e., 30% of 15%) of the agreement value. In addition to the cost of construction, service tax is also applicable on the entire value of other services, such as the provision of the garage, premium for higher floors, etc.
Since VAT is a state subject, various states have their own laws for levying VAT. To overcome the difficulty in ascertaining the exact cost of materials in the agreement amount, states like Maharashtra provide for the payment of VAT on the entire value of the agreement, under a ‘composition scheme’. In Maharashtra, the rate of VAT under this composition scheme, is 1% of the total agreement value.
The law allows you to opt for 30% of the value of the agreement as the service component, and pay the service tax on that portion. Hence, the levy of service tax effectively comes to 4.50% (i.e., 30% of 15%) of the agreement value. In addition to the cost of construction, service tax is also applicable on the entire value of other services, such as the provision of the garage, premium for higher floors, etc.
Since VAT is a state subject, various states have their own laws for levying VAT. To overcome the difficulty in ascertaining the exact cost of materials in the agreement amount, states like Maharashtra provide for the payment of VAT on the entire value of the agreement, under a ‘composition scheme’. In Maharashtra, the rate of VAT under this composition scheme, is 1% of the total agreement value.
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Adv. Vishwa Raj Singh
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