Thursday, August 16, 2012

Pune: VAT mandatory for flats bought between 2006-10

Over four lakh flat owners in the state, who had bought properties between June 20, 2006 and March 31, 2010, may now have to pay Value Added Tax (VAT) to the state government. According to rough estimates, in Pune, there could be over 1.6 lakh flat owners who bought properties between June 2006 and March 2010.
The tax will be collected from the developers and builders, who would seek the money from the flat owners. For a flat that cost around Rs 10 lakh, VAT payable now could be between Rs 25,000 to Rs 30,000, a developer said.   Developers said the state government has initiated steps to recover VAT from them. A trade circular issued by the Maharashtra sales tax commissioner on August 6 supports their claim.
The circular gives a background of the issue and states that, “Developers are liable to pay tax under Maharashtra Value Added Tax Act, 2002 with effect from June 20, 2006.” Developers’ associations in the state including Confederation of Real Estate Developers Association of India (CREDAI) will file a plea in the Supreme Court seeking a temporary stay on the collection of VAT till the apex court decides.
A senior sales tax department official said that the tax will be collected from the developers and not the flat owners. “Developers have to get the registration from the sales tax department for collection of VAT before August 16,” he added. “If the clause about payment of VAT has been mentioned in the agreement between the flat owners and the builder/ developer, then the flat owners will have to pay,” the official said.
The state government had introduced VAT in 2002, but it came into force in June 2006. The Maharashtra Chamber of Housing Industry had challenged its applicability in 2007 in the Bombay high court. In its order on May 2012, the high court upheld the validity of the amendment in the Value Added Tax Act 2002, and the notification of a composite scheme for builders and developers.
The Promoters’ and Builders’ Association (CREDAI, now) had filed a special leave petition in the Supreme Court against the high court order. While the petition has been admitted, no stay has been granted about collection of VAT from June 20, 2006. Since April 1, 2010, flat owners are paying VAT at the rate of one per cent of the cost of the flat to developers. Developers said that the computation of VAT on flats purchased between June 20, 2006 and March 31, 2010 would be based on variables such as cost of the land, construction and the like.

Source: The Times of India, Pune


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