Vat payment demand by builder
sampat mane
(Querist) 23 October 2012
This query is : Resolved
I had taken an under construction flat from the builder Mumbai in the year 2008. Now the builder is demanding to pay VAT of 5% on the sale agreement value?
He has not given his VAT / TAN details but sent 2 demand letters asking to pay the tax immediately.
Ours being a Co-op Hsg society formed without builder co-operation. The builder has not provided any handover, he has not paid property tax till date. Now everything we have paid it.
What should individual flat owner should do and also how the society can help in this?
Can the builder ask penalty in case i may not pay?
What is my right if i wish to pay directly to the goverment?
What is the actual calculation as VAT is on Material and not on the labor. so please advise actual value. Sale agreement is 11lac
please advise
ajay sethi
(Expert) 24 October 2012
IF YOU HAVE TAKEN FLAT UNDER CONSTRUCTION FROM THE BUILDER IN 2008 YOU WOULD BE LIABLE TO PAY VAT . YOU ARE LIABLE TO PAY THE AMOUNT OF VAT
SOCIETY HAS NO ROLE
ajay sethi
(Expert) 24 October 2012
www.dnaindia.com › MUMBAI
3 Sep 2012 – Here’s some good news for those eligible to pay value added tax (VAT). The amount is calculated either on the total cost of the construction material or the agreement value of the flat, whichever is lowest. This means contrary to belief, the VAT amount will not run into lakhs.
The average construction cost in Mumbai and its peripheral areas is between Rs1,100 and Rs1,500. “If the flat is 1,000sqft and the construction cost is Rs1,100, the proposed 5% VAT comes to Rs22,000,” said Anand Patwardhan, former chairperson of the Consumer Guidance Society. He was clearing the confusion over VAT to 35-odd residents of Lakhani Suncoast co-operative housing society, Belapur, on Sunday.
Patvardhan said many developers blatantly charge VAT on the total agreement value of the flat. “It is wrong. A flat is an immovable property and so VAT cannot be charged. The government charges VAT only on the flat’s construction cost. It includes the cost of cement, grills, tiles, etc. There is a particular method to charge VAT and it can be done only as per that,” he said.
Swati Kale, deputy commissioner, sales tax, publicity, explains how VAT is calculated. “There are three formulas to calculate VAT. It is calculated on the construction cost and we have also allowed developers to levy it on the agreement amount. However, VAT is charged on the amount which is the lowest; usually it is the construction cost,” she told DNA.
It is therefore essential for buyers who have bought flats between 2006 to 2010 to ask their developers about the VAT break-up. “It will help them understand the method used by the developer to charge VAT,” Patwardhan said. He said buyers should question the developer if he has registered the VAT they paid with the sales tax department.
“If not, the developer has committed an offence. It is wrongful enrichment. Under section 60 of the state government’s Sales Tax Act, the developer will be penalised and the amount collected by him can be forfeited,” Patwardhan said.
Vimal Roy, resident of Lakhani Suncoast society, said there is a lot of confusion among buyers over VAT. “No one knows the exact method of VAT calculation. Some buyers are ignorant. To bring more clarity, the government should publish the method of VAT calculation in newspapers. However, it seems the government is hand-in-glove with the developers. It wants the buyers to remain confused so that the developers can reap the benefits of this confusion,” he said.
“The method of charging VAT should be more transparent. The central government charges various taxes by giving clear slabs and methods. In this case, there is no clear formula. We need to bring developers, government officials and buyers on one platform to understand the intricacies and impact of VAT,” Roy said.
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H.M.Patnaik
(Expert) 25 October 2012
Dear Sampatji,
Going straight into your question , I find the property was taken in 2008.It is not clear ,whether registration of Sale Deed was executed at that time between you and the Builder or Owner of the property.
Assuming the fact that regn. process was completed at that time on payment of Sale consideration as per the Deed, the Builder certainly has no business to send you demand letters now for payment of VAT after the transaction is over.
In case you had entered any agreement with the Builder prior to transfer of ownership of the said under construction building which includes a clause regarding payment of VAT and you have not complied it by now then you would be liable to clear up the contractual obligations accordingly.
In any case if at all liability to pat VAT arises on your part, pl. check up the breakup of the value and VAT component to find out whether VAT is charged by the Builder who possessed a valid Regn, number on that date and the proper rate of VAT is applied to the transaction.
