Should I pay service tax for under construction building being build on land which is not yet registered with builder ?

POSTED BY veeru ON May 7, 2014 10:32 pm COMMENTS (4)

Hi Team,

we have recently brought a flat in Bangalore costing about 16 lakhs( under construction property) for which we have paid 8 lakhs and remaining 8 lakhs we have planned to go under loan.

Still the builder has not yet registered the land from the seller but is already asking us to pay service tax of 8.5% for the amount paid. Please help me on this on priority. Do we have to really pay this tax before registration?

Reason we got to know is this tax will show that we have paid the cash legally also would help them for land registration or else they would have to release the flat under our name.

Please help me on priority.

Thanks in advance.



4 replies on this article “Should I pay service tax for under construction building being build on land which is not yet registered with builder ?”

  1. ashalanshu says:

    Dear Veeru, now it’s clear to me that builder is demanding the correct amount. VAT is a state tax and hence the money ‘ll go to State Govt. Service Tax is central Govt. tax and hence money from it ‘ll go to Central govt. Please pay the demanded amount through cheque and do not forget to collect the receipt of the same.



  2. veeru says:

    Hi Team,

    Thanks for the prompt response.

    We bought this project since they had promised us to get it registered by week after teh payment, but now its been a year and still the land is not registered.
    They are asking 8.5% for which they sayin 5%wil be of VAT and 3.5% is for TAx, is this VAT is really necessary to be paid.

    Also i wanted to know, list of property documents to be obtained from teh builder as per my knowledge we should be having
    allotment letter
    sale aggrement
    construction sgreement and at last
    registartion and stamp duty.
    PLease let me know if i would have to pay for sale agreement and construction sgreement again along with registration which is left out from teh service tax 8.5% which they are asking for.
    They are forcing us to pay it on priority by a week or teh flat booked under our name would be cancelled. Please let me know on prority

  3. Raja says:

    Service tax is 3.09% of the agreement value. Why is builder demanding 8.5% in the first place? Or are the service tax rates higher in Bangalore?

    Now that you have committed mistake of buying in an under construction property which is not legally clear, you should first demand the legal clearance file from the builder before you pay anything more. Who knows if there is some litigation on the land, even the 8L you have paid will get stuck.

  4. ashalanshu says:

    Dear Veeru, are you really in position to counter your builder? Please pay whatever he is asking for.

    Reason of my above statement – why should I book a flat in a scheme where the land is not registered with the developer?

    You have already committed this mistake so now you do not have option. Yes in case, you are ready to pull out, please do so (although I know you ‘ll not exercise this option).



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