Mumbai Flat Buyers: VAT Problems

Onus to pay VAT is on builder, not buyer: Govt

Rajshri Mehta TNN

      Mumbai: In a bid to quell doubts about payment of value added tax (VAT) on properties bought between June 20, 2006 andMarch 31,2010,thesalestax department has put up a list of frequently asked questions with answers on its website (http://mahavat.gov.in/Mahavat/index.jsp).

      The department has clearly stated that the onus to pay the tax liability is on the developer and not the property buyer. It further said that builders’ tax liability will be adjusted againsttheinstallments paidby them so far. Although builders claim theVATis5% of the value of a flat, the sales tax departmentsaiditwillworkouttoless than 3%.

    Whilethe FAQs may slightly quell the disquiet among property buyers, the state governmentis yettospellouthowitintends to protect buyers, especially those who were not informed of the likely VAT charge, those who had given bank guarantees and deposits to developerswhilebooking flats.
“I learnt I have to pay Rs 3 lakh asVATonly when Iwentto meet the developer for some paper work. He never told me about VAT when I took possession of the flat in 2009. Why should I pay when I was not told about it,” said a Pune-based senior army officer.

    Fifteen residents of a posh Navi Mumbai housing society are wondering what legal recourse to take after their developer recently sentthem a notice demanding Rs 3.57 lakh as VAT. “The developer has threatened to forfeit our bank guarantee if wedon’t pay,” said a resident.

     “On what grounds is the builder asking me to give a cheque when the bank guarantee is in his possession? It is equivalent to paying the VAT. Who will reimburse me for the interest I lost for five years when my guarantee was lying with the developer,” asked a flat owner from Vashi.
“Thoughwe paidVAT at5%, welearntthe amountworksout to less. Who will refund the excess VAT I paid to the developer,” asked another buyer.

    VAT YOU SHOULD KNOW 
Q. When is VAT applicable from? A. June 20, 2006

Q. On what type of contracts is VAT payable? A. VAT is payable on the sale of under-construction flats. It is not payable if a completed flat is sold by the developer

Q. Who has to pay VAT if a developer didn’t tell the buyer about VAT when s/he purchased the flat post 2006? A. The developer

Q. Will VAT apply if the agreement to sell an underconstruction flat was executed before June 20, 2006 and the possession was given after June 20, 2006? Will the amount received prior to June 20, 2006 be exempt from VAT? A. Yes. VAT will be levied on the value received or receivable after June 20, 2006

Source: http://mahavat.gov. in/Mahavat/index.jsp

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