Service Tax & VAT in Real Estate!

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Project delays and cancellations are not the only issues that buyers of under-construction properties in India have to worry about. Their mathematical genius would also be put to test at each stage of tax calculations.  It has to be noted that you have to pay the service tax and the value-added tax (VAT) if you are investing in an under-construction property.

If you are buying a home in any city of Karnataka and want to know all about KVAT, you may be in for a fix and will have to use a lot of your imagination to decide which “schedule” the home-buying process falls into. It is all open to interpretation, and even chartered accountants may fail to point in one direction.

For example, your developer may ask you to pay VAT at 5.5 per cent under Schedule III, because material used in construction (bricks, sand, metal, etc.) are kept under this category. However, as the term construction is not clearly mentioned anywhere, you might be charged VAT at 14.5 per cent. This rate applies to things not covered under any schedule. What else? An end note adds that you will have to pay VAT of 14 per cent for “all other works contracts not specified in any of the above categories”. The developer may have his pick unless you carefully read the purchase agreement and ask for a correction.

It has to be noted that VAT is a multi-point levy, charged for any value that is added to a project. In case of real estate, developers have to pay this levy to the state government for the manufacturing part of the work. While the value of the land is excluded, services tax is levied on labour and other services.

Service tax, on the other hand, is a central levy and is uniform across the country and under the composite scheme, your developer will charge you service tax at 3.09 per cent of the total contract value. This means that service tax will be charged at 15 per cent of the total contract value, and if the service costs of the unit is kept at 25 per cent of the total value, you will have to pay the tax at 3.09 per cent.

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Essentials for your new home

 

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Find the right decor– choose a decor that blends in the shades of your walls to maintain a healthy symmetry of design in your home.

Interior design– the right interior design will help you portray the best stories of your life

Modular Kitchen- create mouth-watering dishes with a well-equipped kitchen

Comfortable furniture– Don’t forget to add comfy cushions to your to-buy-list, or you will miss it when find it missing after a hard day’s work.

Add pictures-  Relive the memories of your past by showcasing some family pictures.

Tea tables and easy chairs-  the presence of a tea table or an easy chair will encourage you to enjoy a cup of coffee amidst the sight of a pleasant sunset.

 Old fashioned dim lighting– the addition of bell shaped lights with yellow bulbs will set the tone to a soothing ambience.    

“Because every home is a canvas where priceless memories are relived”