Are you Eligible for Exemption in Service Tax and VAT while buying homes?

law1By Dr Sanjay Chaturvedi, LLB, PhD

All affordable houses which are under 60 sq mtrs shall not attract any Service Tax.

As per serial no 14(c) of Mega exemption Notification number 25/2015 dated 20 June 2012 – as a low- cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India would not be liable for service tax.

It is a big boom for the affordable housing where smaller percentage is also big burden on home buyers. A 60 sq mtrs or 645 sq ft carpet or 970 sq ft built up areas is exempted from service tax.

Bombay High court has directed that no service tax to be charged on the flat purchased in a residential complex which include value of land. Assessee challenged levy of service tax on ground that composite contract (inclusive of value of land) cannot be charged to service tax in absence of any machinery provision for determination of value of service portion. Further, preferential location charges do not amount to service and cannot be charged to service tax. Rule 2A of Valuation Rules, does not apply when price is inclusive of value of land: Whilst Rule 2A of Service Tax (Determination of Value) Rules, 2006 provides for mechanism to ascertain the value of services in a composite works contract involving services and goods, the said Rule does not cater to determination of value of services in case of a composite contract which also involves sale of land. The gross consideration charged by a builder/promoter of a project from a buyer would not only include an element of goods and services but also the value of undivided share of land which would be acquired by the buyer.

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