Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: empanelment :: form 3cd :: articles on VAT and GST in India :: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TDS :: cpt :: list of goods taxed at 4% :: ACCOUNTING STANDARD :: VAT RATES :: due date for vat payment :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS
 
 
« Transfer Pricing »
 Secondary adjustments to become a reality under Indian transfer pricing regime
  Budget introduces secondary adjustments in transfer pricing
 Transfer pricing: Centre moves forward, introduces ‘secondary adjustments’
 Domestic transfer pricing leeway provides a loophole for Indian companies
 Budget introduces secondary adjustments in transfer pricing
 Transfer Pricing Rules – 2017 novelties
 OECD BEPS transfer pricing rules likely to cost multinationals, but not the IRS
 Transfer pricing’ offers lots of room for manipulating international payments
 New rules for transfer pricing
 Updated UN manual reveals India’s transfer pricing positions
 Budget 2017: What Clarity Can It Bring To International Taxation And Transfer Pricing?

Transfer of a completed immovable propertys title is exempt from service tax
November, 02nd 2015

For long there was a debate around when a developer should charge service tax to a home buyer while selling the property—when the property is being constructed, or even after it is finished and occupancy certificates received. Resolving the issue, the Ministry of Finance issued a circular on 26 October, stating that developers should not levy service tax on sale of flats and apartments once occupancy certificate is received but completion certificate is not. In its statement, the ministry stated, “...that sale of flats/dwellings, etc., where the entire consideration is received after issue of occupancy certificate by Brihanmumbai Municipal Corporation (BMC), leading to a mere transfer of title in immovable property, falls outside the definition of “Service” provided in Section 65B (44) of the Finance Act, 1994, and is therefore, not taxable.” In many projects, the developer may get the occupation certificate phase-wise, and the completion certificate once the whole project is completed.

Such disputes were more common in the jurisdiction of Municipal Corporation of Greater Mumbai, i.e., BMC. Therefore, the ministry specially conveyed this clarification to the tax authorities in Mumbai on 23 October 2015.

WHEN DO YOU NEED TO PAY?

If you are buying an under-construction property from a developer, in such a case, the developer is deemed or considered to be the provider of construction services to the home buyer. So, service tax is charged to the home buyer on the cost of construction. It is not charged on the entire value of the property, but only on the cost of construction; land cost is excluded.

Within a residential project or a building, it is difficult to segregate the construction cost of a single unit. Therefore, for the purpose of calculation, 25% of the gross value of an under-construction unit is considered as the cost of construction and service tax is charged on that amount. If the gross property value is higher than Rs.1 crore, service tax will be charged on 30% of the gross value. As service tax is charged only on the construction cost, the effective rate of service tax on the entire value of a property below Rs.1 crore is 3.50% (14% on 25% of property value) and 4.2% (14% on 30% of property value) for the a property valued above Rs.1 crore.

OTHER COSTS THAT ATTRACT SERVICE TAX

Apart from the basic cost of the unit, a home buyer also has to pay additional charges such as for preferential location, club membership, rain water harvesting and others. All such charges are subject to service tax. If a home buyer takes services of a property agent, valuer, and/or lawyer, their fees, too, attracts service tax. If taking a home loan, service tax is charged on the home loan processing fee. Home insurance premium, too, has it.

WHAT IS EXEMPT FROM SERVICE TAX?

A home buyer need not pay service tax on charges related to external and internal development (EDC and IDC) as these are collected by the developer and paid to the government authority for the related service provided by them. Affordable housing or low-cost housing where the carpet area is less than 60 sq. mt. (about 640 sq. ft) per house in approved housing projects is exempt from service tax.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Company Overview

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions