VAT on realty deals will be less than 5%, says state government | mumbai | Hindustan Times
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VAT on realty deals will be less than 5%, says state government

mumbai Updated: Aug 26, 2012 02:03 IST
HT Correspondent

Even as buyers who bought flats after 2006 fret over the Value Added Tax they will have to pay with retrospective effect, the sales tax department, on Saturday, clarified that the net tax would be much less than 5% of the property value.

It also said the tax is not applicable on flats sold after the builder obtained occupation certificate from the local authority.

It said that the amendment to the definition of ‘sale’ under the Maharashtra Value Added Tax Act, 2002, with effect from June 20, 2006, makes builders and developers liable to pay tax on sale of their “under-construction flats” to prospective buyers with effect from June 20, 2006.

“The liability to pay VAT is on the developer. It is not contingent to the collection by developer. However, whatever options the developer chooses to discharge the tax liability, the net burden will be less than 5%,” said the department in its clarification.

“The government is charging developers a tax on moveable materials. The developers are passing on this tax burden to the flat purchasers. We have given certain options to compute this tax. The total tax amount after subtracting land cost, labour cost would be different in different areas of the city, ranging from 0.5% to 3% of the total sale price of the flat,’’ said a senior sales tax official.

“If a sale takes place after the construction is complete, i.e. after the receipt of occupancy certificate, the tax will not be applicable,” the notification said.

The state government had moved an amendment to charge Value Added Tax (VAT) on construction materials like sand, cement, steel in 2006.

The builder lobby, including the Maharashtra Chamber of Housing Industry, had moved the court against this amendment.

The high court, in its recent order, held this amendment as valid, following which the sales tax department issued notices to builders to pay up the tax due since 2006.