Higher tax on spacious property
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Queries on taxation and service tax liabilities, addressed by Amit Bhagat and Jayanta Kalita of Ernst & Young
I have purchased an under-construction residential flat. The carpet area of the flat is more than 1570 sq ft and the consideration charged is R1.5 crore. For the work completed in the months of March and April 2013, the builder has raised an invoice, with an increased service rate of 3.7% (as against the earlier rate of 3.09%). Kindly advise whether I am required to pay a higher service tax amount.
With effect from March 1, 2013, the government has increased the taxable portion (i.e. reduced the abatement available) in case of such properties with a carpet area of more than 2000 sq ft, and having a consideration of more than R1 crore. Please note that the rate of service tax remains the same @12.36%. In such cases, the effective service tax rate has been increased from 3.09% (with abatement of 75%) to 3.708% (with abatement of 70%). In your case, we understand that although the value of the unit purchased is more than R1 crore, the carpet area of the same is less than 2000 sq ft. Given the above, the increased service tax should not be applicable to the unit purchased by you and the builder should be charging tax @3.09%.
VAT/CST depends on character of sale
We are the wholesalers of consumer goods from various distribution centres across India. Our main customer is our sister concern which procures goods from our centre in Indore. The purchase order is placed from outside the state and transportation is the responsibility of the purchaser, but the transfer of title occurs at our distribution centre. During a recent visit, the VAT authorities contended that since the transfer of title is at the distribution centre, the sale would attract VAT and not CST. Is this correct?