Is my Real Estate Investment Liable to Service Tax
Service Tax is an Indirect Tax applicable on
all services except those covered in
So YES, it is also applicable on service
portion of your Real Estate
If you book a property before it has received
the certificate of completion (Building Use
permission) from the competent authority
then service tax is leviable.
But if you invest in real estate where
certificate of completion has already been
issued then service tax is not applicable.
Service tax is required to be paid to the
builder as and when the builder raises the
invoice on you for such services.
But it is the builder’s responsibility to
deposit this service tax with the
Exemptions from Service Tax:
Construction of a Single Residential Unit
Construction of Low Cost Houses up to a carpet area
of 60 sq. meters per house in a housing project
approved by competent authority.
At the time of sale of property, the amount paid
by the purchaser to the Builder is for:Value of Land
Construction Service provided by the
ST can be levied only on the Construction
Service provided by the Builder/Developer.
The Service Tax on construction is levied at 12.36% on
the total value of services i.e. on value of construction
services. It is not levied on the value of land.
But if the property value cannot be segregated as
Value of Land and
Value of construction services
Then a flat rate of 3.71% is applied on the entire value.
Whereas on residential property having carpet area of less
than 2,000 square feet and the consideration value less than
Rs. 1 crore, the rate of service tax is 3.09%.
COMPUTATION OF SERVICE TAX ON UNDER CONSTRUCTION
Normal Rate of
of Service Tax
Residential property over
2000 sq. ft.
Sale price of Residential
property over Rs. 1 crore.
In all other cases except
specifically exempted (as
DYNAMIC ACCOUNTANTS FOR A COMPETITIVE WORLD