Vat for previous years

This query is : Resolved 

24 January 2019

Dear Sir,
I have received a letter from my builder/developer to pay VAT for the period before 2016 because Haryana government has sent a demand to the builder/developer.
The property was completed and delivered by the builder many years back. All the dues were cleared.
Property is already registered.
Is this demand for the builder/developer to bear or for the owners?

Many thanks.

Vijay Raj Mahajan (Expert)
25 January 2019

It's the builder/developer liability. In Haryana many such builders are big defaulter for tax and extra development charges to government, nothing new in your case, government will prosecute the builder not you for tax default.

Prem Dhawan (Querist)
26 January 2019

Thanks for the response.
I have to reply to the letter from the builder/developer.
Should I write that its the liability of builder and not the owners? Why will the builder agree?

How should I reply?

26 January 2019

Dear Sir,
It is for the builder to clear such arrears if any. It is a legal issue and you keep quite let the builder go to the Civil Court to recover such amount from you legally. You can take appropriate defense in the Civil Court.

Please mark “LIKE” if satisfied by my answer.

Prem Dhawan (Querist)
27 January 2019

According to the letter received from Builder/developer, I am supposed to pay within 15 days.
If I don't pay or don't reply then builder will send a reminder, with a demand for an increased amount by including costs/interests, as it happens in such cases.
Later my property could come under dispute and/or I might have to pay higher amount.

Based on the suggestion from Mr. Vijay Raj Mahajan, should I reply that VAT demand from the government is the liability of the builder/developer and not the owners? Why will the builder agree? What point(s) can I use in my favour?
How should I reply?

According to the letter, this VAT demand is a new demand from the government although no tax was determined/assessed by the government earlier, as it has happened for some other lands/projects. Its not a case of non-payment of tax by the builder or non-compliance of any kind by the builder.
Its mentioned that builder has paid the VAT already and is now recovering it from the owners.

Please find below an extract from the letter.
This is to apprise you that the larger bench of Hon'ble Supreme Court in the case of M/s. Larsen & Toubro Limited versus State of Karnataka & Other (2014) SCC 708 had confirmed that construction of building by builder/developer for and on behalf of buyers would constitute "Works Contract" even in cases where land is also included and accordingly VAT is applicable on all such projects as per State VAT laws on material.
Following the decision of Hon'ble Supreme Court in above case, the Haryana VAT Department had started the process of revision proceedings from the FY 2007-08 onwards for which assessments were already completed and where no tax was determined/assessed on such Projects.
Further to this, the Hon'ble High Court of Punjab & Haryana in the case of CHD Developers Ltd and Others vs. The State of Haryana had directed the Department to frame rules for the computation of assessable value in case of Works Contracts involving transfer of land.
Later on, the Haryana Government came out with Lump sum Composition Scheme under Rule 49A of HVAT Rules 2003 giving option to the builders to pay by way of composition of lump sum tax calculated at the compounded lump sum rate of one percent. We also opted for the Lump sum Composition Scheme w.e.f. 01.04.2016 without recovering the same from the allottees/owners.
Further, for the period up to 31.03.2014 the Excise and Taxation Department; Haryana Government came out with an Amnesty Scheme, namely, the Haryana Alternative Tax Compliance Scheme for Contractors 2016 giving option to the builders to deposit Value Added Tax (VAT) @ 1.05%. We opted for the same and deposited VAT accordingly on behalf of the allottees/owners.
In view of the aforesaid, you are requested to deposit a sum of Rs. …..>.... towards Value Added Tax (VAT) within 15 days of this letter.

Rajendra K Goyal (Expert)
13 March 2020

VAT notice is sent to builder by VAT Department, hence liability of builder, let them pay, give proof of payment and then ask from you.

It seems that the demand is from other flat holders also, may proceed / oppose jointly if possible.

Generally Builder Buyer Agreement contains general term regarding acceptance of any tax liability present / past / future by the buyer. Please discuss the same with some local lawyer and show him all the documents specially the language of the term contained in BBA and your liability.

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