The Maharashtra Govt has decided to collect VAT (Value added tax) from home owners who bought their under-construction homes directly from builders between June 2006 and March 2010.The value of VAT has been decided as 5% of the total agreement value. This amount will have to be paid before August 31st.
Eg: A buyer who bought a flat worth 2 crores from a builder between June 2006 and March 2010,will now have to pay 10 lakhs as tax before 31st August 2012.
This tax is not valid for resold apartments (flats bought from a previous owner).
Flats sold after April 2010 will be charged only 1% VAT and 3.75% Service Tax. There is No Service Tax or VAT levied on completed projects with OC (Occupancy Certificate). Flats with more than 2000 sq ft or 1 crore price will be charged 4.5% Service tax along with 1% VAT.
Maximum amount of flats were sold between 2006 and 2010,when prices were at an all time high. Builders have been assigned the task to collect the money from the buyers.
Failure to do so will invite penalty.
A sales tax officer said that during the recent raids on builders, it was noticed that the builders had collected this money from the buyers but had not deposited it with the sales tax dept.
The department expects to collect 800-900 crores by this.
Further clarifications on VAT on flat purchase:
VAT is liable on the total cost of construction of a flat or the agreement value,whichever is lower.So basically,if you purchased a 1000 sq ft flat and the construction cost is 1200 per sq ft,then the VAT you have to pay is 5% of Rs 12,00,000 i.e. Rs 60,000.
There is a further update on VAT on house purchases.
The govt is in consultation with various depts to come to a conclusion regarding the formula for calculating the VAT.Before any decision is arrived at,the builders should not harass buyers into coughing up 5% vat.In absence of any conclusion by the committee,the developers can charge between 0.5% and 3% VAT if at all necessary.
- VAT: an introduction. (businesshelp.lloydstsbbusiness.com)