Is my Real Estate Investment Liable to Service Tax

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Is my Real Estate Investment Liable to Service Tax

  1. 1. Service Tax is an Indirect Tax applicable on all services except those covered in negative list. So YES, it is also applicable on service portion of your Real Estate Investments.
  2. 2. 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.
  3. 3. 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 authorities.
  4. 4. 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.
  5. 5. 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 Builder/Developer ST can be levied only on the Construction Service provided by the Builder/Developer.
  6. 6. 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%.
  7. 7. COMPUTATION OF SERVICE TAX ON UNDER CONSTRUCTION PROPERTY Particulars Abatement Taxable Normal Rate of Allowed Component Service Tax Effective Rate of Service Tax Residential property over 2000 sq. ft. 70% 30% 12.36% 3.708% Sale price of Residential property over Rs. 1 crore. 70% 30% 12.36% 3.708% 75% 25% 12.36% 3.09% In all other cases except specifically exempted (as mentioned above)
  8. 8. info@choksitax.com www.facebook.com/choksitax DYNAMIC ACCOUNTANTS FOR A COMPETITIVE WORLD

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