Service Tax for Under Construction Property

[hiren]

Hi Friends,

Does anybody have any idea about the service tax to be levied on under construction properties as per the Budget?

1) Is it 2.5% on agreement value or on percentage of the agreement value? People I have consulted say it is on agreement value.

2) Will a housing loan cover service tax in addition to stamp duty charges & registration?

Awaiting replies & suggestions.

Thanks,
HM

 

[Alchemist]

The service tax is levied on the agreement value.

The government however has now said that any exchange of money from the consumers to the developers will be charged as service tax, which means all properties that are really under construction where the title has not transferred yet from the developer to the consumer will also be charged service tax i.e. 10.3% as outlined in Budget 2010. The tax will be calculated on 33% of the agreement value.

Source.

The abatement was later increased from 67% to 75%.

Thus, the service tax will now be little less than 2.6% of the gross sale value.

With Thursday's announcement, service tax would be levied on 25 per cent of the gross sale value of property compared to 33 per cent proposed in the budget in February this year.

Source.

 

[hiren]

Hi Alchemist,

Thanks for the detailed reply. This ruling just made me poorer by 1.5 lakhs.